'Airfares down despite 20x rise in costs': Harsh Goenka backs aviation sector amid IndiGo chaos

Amid IndiGo chaos and massive criticism of the airline, RPG Enterprises Chairman Harsh Goenka on Wednesday reminded the people of the economics of India's aviation industry. IndiGo, a budget airline, has come under massive fire for what many say is overstretching its flight routes while keeping the number of pilots low.

In a post on X, Goenka said that airfares in the country have fallen if adjusted for inflation. "Before we judge Indian aviation, a reminder: in 45 years, ATF (Aviation Turbine Fuel) prices are up 20×, aircraft costs 20×, pilot salaries 50× - yet airfares, adjusted for inflation, have fallen," he wrote. 

"We'll pay Rs 5,000 for a 100 km taxi ride, but feel unhappy paying the same for 2,500 km by air. Criticism is fair, but let’s not ignore the economics that keep India flying affordably," the industrialist further said. 

Earlier, former Air Asia CFO Vijay Gopalan explained why running an airline is risky and as well as tough in India. In recent history, he said, Jet Airways and Kingfisher have folded, and even SpiceJet was in deep trouble. "Structurally, there is something about Indian aviation which is not very profitable," he said.  

According to the former aviation executive, 50% of the airline's cost is governed by air turbine fuel, which is the fuel cost. "The taxes are not governed by GST. It is governed by the state government. And in some states, the taxes on the fuel are as high as 30%. It's not going to be structurally profitable. We need to rationalise the cost," Gopalan said.  

The former CFO cited the dollar as another major problem. About 75% of the airline's spending happens in US dollars, he said. "Meaning, my fuel cost is benchmarked to the Brent Index, which is a dollar-denominated one. My aircraft leases are paid for in dollars. My maintenance costs are paid for in dollars. So, when you have all these things in dollars, foreign exchange should be maintained."

Gopalan suggested that the transaction in the dollar-denomination raises the cost when the rupee depreciates. "Today, we are speaking about rupee being at 90 to a dollar. So, if my payout is 100 dollars for aircraft lease rentals. Two years back, I ended up paying Rs 8,000. Today, I end up paying Rs 9,000 for the same aircraft. So, this is the second biggest issue. Because most of our costs are dollar-denominated."