India's airlines are hardly among the healthiest financially, but there is evidence that they are moving in the right direction. One major hurdle that all face, however, is the high local cost of aviation fuel. India's sales tax and administered price mechanism (APM) together mean that more than 40% of aviation turbine fuel uplifted in the country costs 31% more than the international average, Air India says.

Sales taxes alone can be as high as 36%, while hedging has been denied to Indian carriers until recently, imposing a huge burden at a time when fuel prices are already sky-high.

Air India, the country's largest airline by turnover, made a $17.6 million operating profit in the 12 months to 31 March last year, but claims fuel increases cost an additional $41 million. Even sharper rises in its current financial year are likely to lead to an operating and net loss, followed by an operating profit in 2001/02 (spending on aircraft and spares will hit the net figure) and a net profit in 2002/03.

Indian Airlines, number one in terms of passengers carried, initially projected a $6.5 million profit for the current financial year in a December 1999 budget, but a hijacking that same month, followed by the Patna crash in January and the big fuel price hikes of March and September, mean that that figure will not now be attained. Fuel price rises hit Indian even harder than they do Air India, since more of its fuel uplift is domestic. Last year's rises increased the fuel component of its costs from 22% to 31%. Indian has at least managed to increase its market share in the last six months, and is carrying up to 25,000 passengers a day, compared with only 16,000 immediately after Patna.

Jet Airways is currently India's most profitable airline, and has delivered an improved profit every year in recent years. It claims a domestic market share of about 40%, and aims to grow capacity by around 18% in 2001/02 (in available seat kilometres) and to carry 5.6 million people.

Source: Flight International