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Why Are Indian Airline Companies Struggling?

Professor of Financial Economics and Part-time Value Investor, Transfin.
Aug 27, 2018 9:07 AM 1 min read

Price of jet fuel (comprising 40% of airline cost base) went up 40% in last 12m. Also, Indian states charge c. 30% sales tax and 14% excise duty, further hurting profitability.


Issue accentuated by the fall of Rupee vs Dollar considering 25-30% of non-fuel costs are Dollar denominated (aircraft leases, ground handling charges).


However, ticket prices stay stagnant courtesy high competition and price caps (under UDAN).


Indigo's revenue per passenger km down from Rs 4.3 to Rs. 4.1. Jet is down from Rs 6.4 to Rs 5.6. Spice Jet is flat at Rs 4.2.


Jet Airways has INR800bn+ net debt, higher than its equity and 9x its FY17-18 EBITDAR, impeding its ability to raise capital. 24% owner Etihad unable to bail out due to its own financial troubles.