Crisil report warns against impact of fluctuating oil prices, rupee on airlines

Higher fuel costs and currency losses are expected to push airlines deep into the red this fiscal, rating agency Crisil Ratings said in a report on Thursday.

According to the report, airlines are required to hike fares by 12 per cent to offset the "fuel-forex double blow".

"At an estimated Rs 9,300 crore, the industry's losses at EBIT (or earnings before interest and tax) level would surpass the Rs 7,348 crore blow it was dealt in fiscal 2014," the report said.

"That was followed by three good years through fiscal 2018 when carriers reeled in an aggregate profit of Rs 4,000 crore on average at the EBIT level."

As per the report, the prices of aviation turbine fuel (ATF) which accounts for 35 to 40 per cent of the total cost of airlines are expected to average 28 per cent higher on-year compared with fiscal 2018.

Furthermore, the depreciation in the rupee will translate into higher debt liability.

"Airlines have sizeable foreign currency debt, while their revenues are largely earned in rupees," said Nitesh Jain, Director, Crisil Ratings.

"With 73 per cent of their debt denominated in foreign currency, the debt liability of the three listed airlines (aggregate market share of 71 per cent) will go up by 10 per cent this fiscal."

(With inputs from agencies.)