Why Are Airlines Losing Money? | Faye D'Souza

Summary

The video examines why Indian airlines can charge high fares yet continue to lose money. It cites IndiGo’s quarterly loss of nearly ₹1,900 crore despite higher revenue, and the Air India Group’s annual loss of about ₹22,000 crore.

India is the world’s third-largest domestic aviation market, but it is highly concentrated. IndiGo had about 66% of the market and Air India 24%, leaving the two groups with roughly nine out of every ten domestic journeys.

The presenter identifies several pressures on airline finances:

• Fuel costs and taxes: Aviation turbine fuel is expensive and, unlike most goods and services, is outside GST. It is subject to state VAT and other taxes, which airlines say cannot be offset through input tax credits. An industry association says fuel’s share of operating costs has risen sharply.
• Airport charges: Airlines pay to land, park and use airport facilities, while passengers also see airport-related charges in their tickets. The video questions whether travellers should bear the cost of new airport infrastructure, including facilities that are reportedly little used.
• Limits on fare increases: Indian travellers are price-sensitive. Airlines risk losing passengers to trains, postponed trips or online meetings if fares rise too much. But fares that are too low can leave airlines unprofitable.
• Dollar-denominated expenses: Ticket revenue is collected in rupees, while aircraft leases, parts and maintenance often cost dollars. A weaker rupee squeezes margins.
• Route disruptions: Restrictions on Indian carriers using Pakistani airspace and disruptions in West Asia can force longer routes, increasing fuel use and aircraft time, particularly on international services.

The Federation of Indian Airlines has asked the government for relief, including action on fuel taxes. The government offered airlines a ₹10,000-crore interest-free advance to buy fuel, but the video says no airline took it up. It also notes that government fare caps, introduced during a period of sharp price increases, helped passengers but constrained airlines’ ability to raise revenue.

Airlines are seeking fuel-tax reform, more affordable airport costs, and stronger domestic aircraft-maintenance and financing industries that could reduce reliance on dollar payments. The presenter argues that healthier airlines could mean better service and more choice for passengers. She also raises wider concerns about a market dominated by two players and questions whether airlines are being treated as a source of revenue while travellers pay repeatedly for aviation infrastructure.

Presenters and Contributors

• Presenter: Faye D’Souza
• Research: Ajit Andhare
• Producer: Ira Jha
• Editor: Shiva Singh