Why Full Service Airlines Are Bleeding in India

A Case Study

There has been much debate over where really lies the problem with the airlines sector. Full service airline providers are posting losses year on year while low cost carriers seem to be posting some profits. Airlines companies in India together posted a record net loss of 44% in the last fiscal year. This is much higher compared with any y-o-y losses seen in the past by this evolving industry.

Full service airlines are working to being down their cost available per seat km. According to a recent study, this cost for full service airlines has come down from Rs. 4.60 has fallen down to Rs. 3.02. Whereas, this cost for low cost carriers is Rs. 2.40. While all airlines are working to cut their costs, full service airlines are unable to do it to the extent LCCs are. Airlines claim that steep aviation turbine fuel prices and expensive airport charges in the country are the primary cause for their losses. Aviation turbine fuel prices are very high in India compared with other countries in the world. Even so, they have substantially gone down over the last year from Rs 71,028 a kilolitre in August ’08 to Rs 36,992 a kilolitre in the same month of 2009. The flipside is that most full service airlines in India also run international routes. Fuel used on international flights is available at international prices. This gives the companies some leverage in terms of fuel price as well. Are full service airlines conveniently ignoring this fact? (more…)