According to the Directorate General of Civil Aviation, India’s air passenger traffic has grown by at least 16% annually over the past decade. Yet, that growth has been largely profitless. The airline business is a risky one around the world with high capex and low profit margins. But India is a special case even so. There are a few reasons for this, some of them are linked to international factors. First, the rupee’s depreciation is hitting carriers hard as it did a few years ago. About 25-30% of their costs, excluding fuel, are dollar denominated—from aircraft lease rents and maintenance costs to ground handling and parking charges abroad. Second, and crucially, aviation turbine fuel (ATF) costs remain as big a pain in Indian carriers’ necks now as they were when the financial crisis hit. Other reasons are to do with the nature of the Indian market. The breakneck growth sets up competing tensions.

(Live Mint)