Cut flab, not shut shop, KPMG tells India's loss-making aviation sector

According to KPMG, India's loss-making aviation sector should be ready to accept rising aviation turbine fuel (ATF or jet fuel) as a way of life at a time when global crude oil prices are touching record high levels.

Instead of exiting the sector, the carriers get theirs acts together and begin getting leaner so that they can even rake in profits, Marc Martin, senior adviser for aviation at KPMG, said.

Last month, Kapil Kaul, CEO, Indian Sub-Continent, Center for Asia Pacific Aviation (CAPA), said the losses incurred by the Indian aviation industry could surpass $2 billion and "shock almost everyone" even as soaring fuel costs and economic turmoil hit passenger numbers.

The losses suffered by the air carriers would be proportionate to the size of the fleet and operations, Kaul said.

According to Kaul, the Indian aviation industry is not likely to stage a recovery before 2010 and till then, the prudent thing for airlines to do would be to "rationalize" the networks and instead of competing with each other, work out a "package" to cut costs.

Aviation Minister Praful Patel also voiced his concerns last month, urging ministers and oil companies to find ways of bailing out the domestic air carriers.

India's aviation sector is "at a crossroad" and "it is a matter of time before this dynamic sector becomes unhealthy," Patel said, warning that if "a vital sector like aviation go belly up...it will have a cascading effect or multiplied effect on the entire economy."

ATF prices have doubled over the last year and now forms almost 80 percent of overall operating costs and almost three-fourths of a budget airline's ticket fare.

But most airlines, which are suffering losses in millions of dollars every day, are in a dilemma as hiking airfares could lead to dwindling of passengers and losing them out to Indian Railway which charges lower priced train fares.