Airlines fly high as strong Re makes lease rentals and wage bills light
Appreciation of the rupee could not have come at better time for the Indian airline industry as it reels under rising fuel costs.
By Nirbhay Kumar & Sudipto Dey, TNN |
NEW DELHI: Appreciation of the rupee could not have come at better time for the Indian airline industry as it reels under rising fuel costs. Most of the major airlines have managed significant savings in lease rentals, maintenance and wages paid to expats - all denominated in dollars. Rise in crude prices have also been partially offset by appreciation of the rupee.
“Over the past few months, firming of rupee has been positive for us and for the quarter ended June, we earned a profit of about Rs 130 crore on this account,” Jet Airways executive director Saroj K Datta said. “A large chunk of earning was on account of loan revaluation,” he added. Jet has a foreign currency-denominated aircraft delivery loan ranging between $700 and $800 million as of June 2007.
Analysts maintain that airlines will be able to effect about 10% savings in lease rentals, expat wages and distribution costs on account of a surging rupee. They also feel that the positive impact would continue throughout the financial year.
Country’s largest budget carrier, Air Deccan, recorded a savings of Rs 16 crore in September this year as compared to the same month last year, said an airline spokesperson. According to another budget carrier, SpiceJet, the net positive impact on an annualised basis ranges between 7% and 10% on its expenses.
This includes expenses related to payments made to expat pilots for maintenance and lease rentals of aircraft. “These comprise 30%-35% of our total expenses,” said SpiceJet CFO Partha Sarathi Basu. SpiceJet too had recorded profits of over Rs 18 crore during April-June, thanks to the firming rupee.
Airline analysts note savings in forex expenditure would reduce the red ink on the balance sheet of airlines. As per industry estimates, airlines recorded losses to the tune of Rs 2,000 core in FY 2006.
“Over the past few months, firming of rupee has been positive for us and for the quarter ended June, we earned a profit of about Rs 130 crore on this account,” Jet Airways executive director Saroj K Datta said. “A large chunk of earning was on account of loan revaluation,” he added. Jet has a foreign currency-denominated aircraft delivery loan ranging between $700 and $800 million as of June 2007.
Analysts maintain that airlines will be able to effect about 10% savings in lease rentals, expat wages and distribution costs on account of a surging rupee. They also feel that the positive impact would continue throughout the financial year.
Country’s largest budget carrier, Air Deccan, recorded a savings of Rs 16 crore in September this year as compared to the same month last year, said an airline spokesperson. According to another budget carrier, SpiceJet, the net positive impact on an annualised basis ranges between 7% and 10% on its expenses.
This includes expenses related to payments made to expat pilots for maintenance and lease rentals of aircraft. “These comprise 30%-35% of our total expenses,” said SpiceJet CFO Partha Sarathi Basu. SpiceJet too had recorded profits of over Rs 18 crore during April-June, thanks to the firming rupee.
Airline analysts note savings in forex expenditure would reduce the red ink on the balance sheet of airlines. As per industry estimates, airlines recorded losses to the tune of Rs 2,000 core in FY 2006.
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