Civil aviation ministry may seek infra status for struggling sector

Move could be to enable low-cost capital access for airlines, which are trying to stay up in a tide of red ink

The ministry of civil aviation might ask the finance ministry for infrastructure status to the airline sector, battling high operating costs.

“We are looking at writing (for this) to the finance ministry. This would help airlines raise much required capital for sustaining operations,” said a senior ministry official, who did not wish to be identified. “They could issue tax-free bonds or opt for external commercial borrowing at low interest rates.”

According to the Centre for Asia Pacific Aviation (Capa), Indian airlines are set to lose a total of $1.3-1.4 billion this financial year, as compared $1.7 billion in 2013-14. In the past seven years, accumulated losses have been $10.6 billion.

At the end of March 2014, the airlines had a combined $585 million (Rs 3,250 crore) of cash on hand, the equivalent of less than three weeks’ revenue, Capa said. IndiGo is the only airline to have maintained a steady profit and the others need a total of $1.6 billion in funding this year to sustain their business models.

A close look at the financial data filed with the stock exchanges and the ministry of corporate affairs show for the year ended March 2014, the top five domestic airlines reported a combined loss of Rs 9,738 crore, a rise of 85 per cent from the Rs 5,276 crore the previous year. But for IndiGo and GoAir’s combined net profit of Rs 322 crore, this total of losses would have been Rs 10,060 crore. And, more than half the overall loss was of government-owned Air India (AI).

  Its net loss fell marginally to Rs 5,389 crore in FY14 from Rs 5,490 crore in FY13. Jet Airways’ net loss rose seven-fold to Rs 3,668 crore and SpiceJet’s about four times to Rs 1,003 crore.Experts said a rise in fuel costs and currency depreciation had hit the of all domestic carriers. The losses of Jet, AI and SpiceJet widened in FY14. IndiGo’s net profit dropped 60 per cent to Rs 317 crore and of the Wadias’ to Rs 54 crore from Rs 104 crore in FY13. The decline in IndiGo’s profit was despite the airline’s revenue increasing 17.5 per cent to Rs 11,117 crore, showing higher operating expenses. For FY13, its net profit was Rs 787 crore on revenue of Rs 9,458 crore.

For GoAir, too, the sharp drop in net profit was despite its operating revenue rising 26.7 per cent to Rs 2,435 crore in FY14 from Rs 1,921 crore in FY13. GoAir’s earnings before interest, tax, depreciation and amortisation halved to Rs 129 crore, again pointing to an increase in operating expenses. For FY14, it recorded a pre-tax profit of Rs 8.4 crore, against Rs 147 crore in the previous financial year.