#INTHEAIREVERYWHERE
Monday
February 24,
2025
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#INTHEAIREVERYWHERE |
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| Vol. 24 No. 8 | Monday
February 24,
2025 |
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Indian Rupee Value Challenge |
The falling value of the rupee is making life difficult for stakeholders in Indian air cargo – especially smaller Indian airlines. The Indian Rupee exchange rate is now at 87+ to an US dollar – predictions indicate that it could go up to Rs 95 a dollar – and it is anybody’s guess how airline CEOs are making ends meet because airline expenses including lease and maintenance are all in dollars and add up to 60 percent of operating costs. One airline CEO put it rather succinctly: “Its keeping me awake at nights . . . I do not look forward with hope to a new day any more.” The huge cost of operating a cargo carrier has seen few players. It may be pointed out that India has only a handful of dedicated domestic air cargo carriers. There is Blue Dart/DHL and Quikjet. Also, the government has not made it convenient to launch air cargo carriers. In the beginning of 2024, the government of India after reviewing its open sky policy for foreign air cargo carriers permitted foreign cargo airlines to operate from all its international airports for a period of three years. Earlier, the Covid-related protocols had restricted foreign air cargo carriers to operating from the six major airports – Mumbai, Delhi, Bengaluru, Chennai, Kolkata and Hyderabad. The policy of allowing all foreign cargo carriers to operate from all airports was brought in to boost the perishables trade. The move allows agri producers and exporters in rural India to reach out to newer global markets. In fact, the move encouraged the likes of Kenya Airways to start a twice-weekly B737-800 freighter from Mumbai to Nairobi. While ICRA, an Indian independent and professional investment information and credit rating agency, has indicated that the Indian aviation sector will see a net loss of Rs 20-30 billion in FY2025 and FY2026 (USD$229.5 mn- USD$344 mn) each, the bigger domestic carriers with deeper pockets and more international operations – Air India and IndiGo – have prepared for the slow losses. It is the smaller domestic carriers that are being affected. According to ICRA, while the losses of Indian carriers will be lower than the past, lease, high fuel prices and maintenance have raised costs. Take the case of Aviation Turbine Fuel (ATF): prices have gone down by 6 percent year-on-year to Rs. 96,192 per kiloliter (one USD is Rs 87+ now) during FY2025 but are still above pre-COVID levels. Moreover, nearly half of airline expenses including aircraft leases and maintenance, are dollar denominated, leaving carriers prone to currency fluctuations Airplane lessors are hesitant to send their planes out to new Indian carriers largely due to the difficulties experienced in taking over the planes after the carriers stopped operations. Added to that is the fact that domestic airlines have seen a 6-8 percent rise in aircraft lease rentals. Not too long ago, an official of a regional carrier, that is planning to start operations with two Embraer planes was quoted saying that not only had leasing costs risen due to the falling rupee but the company's plans to hire foreign pilots had become costlier since salaries are paid in dollars. In addition to lease rentals, there are other dollar-denominated areas: vendor payments for spare parts, maintenance services, and IT systems. For new and smaller airlines, these dollar-denominated expenses often increase costs and put a spanner in daily operations and growth plans. It is in such circumstances that India’s air cargo carriers operate. To top it all, the air cargo market is growing steadily driven by e-commerce and perishable goods demand. While the bigger cargo carriers have started tying up with passenger carriers to boost their cargo, and counter rising costs – SpiceJets cargo entity, SpiceXpress has a partnership with Star Air, a domestic regional airline, for managing belly space for Star Air, while Big player IndiGo has an interline agreement with Air France KLM Martinair Cargo – the smaller cargo carriers do not have that luxury. Additionally, the smaller carriers cannot hedge fuel costs that turn small price increases of ATF into big blows. Tirthankar Ghosh |
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 Vol. 24 No. 5 ATC Everyone's Valentine Chuckles for February 5, 2025 Under 45 Grows SAF WFS Brings Back JFK Building 260 Cargo Human Care In 2025 The Kelly Act |
 Vol. 24 No. 6 Alaska Pivots Cargo Offering Ian Morgan New Horizons Air India U.S. Pitch Chuckles for February 14, 2025 India Cargo National Asset Orlando Cargo taking Off Dog Days Of Winter |
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Publisher-Geoffrey Arend • Managing
Editor-Flossie Arend • Editor Emeritus-Richard Malkin |
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