Airlines are asking the government to help them obtain unsecured credit from oil companies and airports to help them get over operational difficulties, as rising oil prices have threatened their financial stability.
Competition and high demand for air travel is forcing airlines to keep airfares low, which in turn is having a drastic effect on their day to day operational costs.
The Federation Of Indian Airlines (FIA), which consists of Jet Airways, IndiGo, SpiceJet and GoAir, have sent a letter to the government addressing this issue saying that “Airlines are facing challenging times and substantial losses in the domestic environment”.
In the letter, airlines have asked the government to assist them to acquire a penalty-free, one-month unsecured credit from oil companies, as well as state-run Airports Authority of India and private airports.
The plea is the latest signal of the crisis facing airlines in India, where the world’s fastest growth in air travel has created a capacity shortage, while high fuel prices and a weaker rupee squeeze them further.
Base airfares can be as low as Rs 1 in India, while states charge taxes as high as 30% on jet fuel. The rupee has weakened almost 11% this year against the dollar, driving up financing costs on overseas borrowings. Airlines are unable to pass on those costs to the customer to keep their market share.
CRISIL, a renowned global analytics firm, has suggested that airlines will have to increase their current airfares by 12 % if airlines want to recover their losses and have enough to operate their day to day functions.