Efficiency key to airlines’ profitability: KPMG

July 3rd, 2008 - 7:17 pm ICT by IANS  

A file-photo of KPMG

New Delhi, July 3 (IANS) Airlines in India could be profitable despite rising aviation fuel prices, if they focussed on improving efficiency, says a global consultancy firm. In a report, “Indian Aviation: Flying Through Turbulence” released here Thursday, KPMG said that while aviation turbine fuel (ATF) accounts for about 35 percent of airline operating costs, this expenditure only occurs when a flight is operated, which incidentally is its main revenue generator.

“Hence, an airline’s expenditure on fuel is directly proportionate to occupancy and load,” it said.

The study further said that while ATF prices may be taking a toll on profitability, it is currently not possible for any airlines in India to make profits within three years of starting operations as according to current capital expenditure, break-even occurs in a minimum of five to seven years of operation.

“Its profitability, revenue and yield are predominantly driven by economic and external factors and this makes it most vulnerable to even the slightest variation in economic growth rates, national disasters, epidemic outbreaks, terrorism, war, currency fluctuations and most importantly oil prices,” KPMG executive director Raajeev Batra said in a press statement.

The study noted that while international passenger traffic grew at 15 percent during April-March 2007-o8, domestic air traffic grew at 23.8 percent.

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