Why are the airlines in India making losses when the aviation sector is growing 12% to 15% every year?

Asked on by hirensoni

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

First of all, it is important to realize that growth in the short term does not imply current profitability.  Airlines may be expanding now because they anticipate future profits.

In the case of India, the lack of profitability is due (at least according to air transport groups) mainly to the government creating an unfavorable business climate.  Specifically, the airlines feel that taxes on fuel are too high and that there are too many barriers to foreign investment that could help the industry.  In addition, the industry believes that the infrastructure for airlines in India is insufficient.  

From this perspective, at least, the airlines are not profitable because the government has not created the environment that is necessary for them to thrive.


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