Mumbai: Airlines operating in India require strong and supportive promoters to improve their viability amid a challenging operating environment, according to an India Ratings & Research report.
Aviation companies are prone to becoming distressed assets due to their cost structure-related inefficiencies, driven by taxation, regulatory issues, high financial leverage and chronic cash flow generation issues, the report said. Globally, the airline sector is vulnerable to cyclical demand due to capital intensity and price wars.
The research firm estimates that tax on aviation turbine fuel erodes Indian airline companies’ operating margins by around 12-18 percentage points. Higher estimated maintenance cost and sundry taxes further weaken the margins. Infrastructure-related constraints make aircraft-handling and scheduling inefficient. The utilisation level (measured as block hours of an airline) of domestic aircraft is 10-15% lower than that of profitable global players, it added.
Read News In full 22/08/13 Chandan Kishore Kant/Business Standard
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