Indian airlines should raise fares by 15%: Boeing

Cash-strapped airlines in India should raise fares by at least 15 per cent by achieve the break-even point, a senior official of Boeing said here today.

Boeing Senior Vice-President, Sales in Asia Pacific and India, Dinesh Keskar also said airlines in India are estimated to post over USD 1 billion loss in the current fiscal. Stiff competition, depreciating rupee and the rising costs of fuel have impacted earnings of the Indian airlines, he added.

"The best way [for the airlines] is to raise fares by minimum 15 per cent to hit a break-even point," he told PTI at the Singapore Airshow here. 

"Indian airlines would suffer over USD 1 billion in FY2011-12 due to high operating costs," he added. Keskar pointed out that these cost elements were beyond the control of airlines.Airlines in India are going through turbulent times and many of them have been consistently registering losses. High fuel costs and low passenger fares are cited as the main reasons for rising operating costs.

National carrier Air India is sitting on huge a debt of around Rs 65,000 crore. Private sector Kingfisher Airlines has loans to the tune of over Rs 6,000 crore. Keskar said the present business environment for the Indian airlines would have to be corrected and the operators of this capital and cost intensive business would have to figure out how to control costs and improve revenues.

The Indian government's has taken steps like allowing the import of aviation turbine fuel and foreign direct investment in Indian airlines while rationalising taxes. Otherwise, the Indian airline business was rosy and Boeing was bullish on the Indian market, which he projected would invest USD 150 billion on 1,320 new planes in the next 20 years.

"At Boeing, we are not changing this projection of the Indian market and we are hopeful the airlines will work out ways to manage their market," he said. He said 75 per cent of the 1,320 new planes would be 737 or A320 type, the most suitable for the Indian domestic traffic. 

Keskar said Boeing was also making its contribution to help the Indian airlines save costs, such as the induction of 787 aeroplanes which burn 20 per cent less fuel than the present planes.

Boeing's 737 planes, which burns between 12 per cent and 15 per cent less fuel compared to the other exiting planes, would also be joining the airline fleets in India.

Among other initiatives, Boeing was set to operate a maintenance, repair and overall facility at Nagpur to serve its Indian customers from the second quarter of 2013.

"The USD 100 million facility currently under construction is our contribution to the Indian aviation infrastructure," he said.

Boeing's orders from India include 27 787 for Air India, 10 787 for Jet Airways, 30 737 for Spice Jet and about 39 737 for Jet Airways.

These were worth about USD 14 billion for delivery over the next four years, he said.

"India is a big market and we are pleased we have a big footing in it. We will continue to build on it."