Gas Prices Stunt Aviation Boom In India

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Rising oil prices have India's recently booming aviation industry seeking governmental intervention through application of lower taxes to help stem losses that have been piling up since last year. Fuel accounts for roughly half the cost of operation for Indian carriers, according to some sources, and the steadily rising costs of air travel passed on to their passengers by the airlines has resulted in a slowdown of passenger growth. Going forward an overall loss of $2 billion plus is expected for the 2008-2009 timeframe and that is the amount being sought by a delegation seeking subsidies from the government on behalf of the airlines. The Indian airline industry lost more than $1 billion in the fiscal year 2007-2008. Last week, the Prime Minister refused to announce any immediate relief, but said the government would review the situation Monday (June 16) and hinted that fare structures should be addressed. The trickle down is likely to hit manufacturers as Indian carriers postpone planes for fleet acquisition. The prior boom and hard times may bring about consolidation in the Indian aviation market as well as cost-cutting measures to include fleet cuts, deferred routes and restructuring.