Airlines brace for Q4 losses
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Airlines have been lambasted for raising airfares in recent months, but their arguments for doing so may be justified as they face losses in the final quarter of the fiscal year. After Jet Airways and SpiceJet posted profits in consecutive quarters and Kingfisher narrowed its losses, a dramatic slump in passenger revenues and a massive hike in operating costs threaten this winning streak.
SpiceJet CEO Neil Mills told the Financial Express that passenger revenue has come down significantly while operating costs moved up on rising fuel prices. “What can one expect when operating cost goes up and passenger revenue comes down?” Mills asked.With Aviation Turbine Fuel (ATF) constituting 40% of airline overheads, recent price increases to the region of US$130 (INR5,816) per barrel are hurting domestic carriers. Although airlines have passed on some of the cost to passengers through the fuel surcharge, Amadeus India Managing Director Ankur Bhatia said; “Since operating cost has gone up sharply, we expect some loss by airlines in the current quarter,”The industry estimates that ATF prices have risen by 14-16% since January, and as they operate on margins of just 3-4%, operators claim increases in charges are legitimate and that in spite of those the business are still running at a loss.
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