Fuel costs and taxation hinder profitability of Indian airlines, says IATA’s Thomsen

India’s aviation market is soaring, with consistent increases in passenger traffic and new flyers joining the ranks every month. However, profitability remains elusive for Indian airlines, even as the sector grows at an unprecedented pace.

In an interview with CNBC-TV18, Marie Owens Thomsen, Chief Economist at the International Air Transport Association (IATA), noted that the lack of profitability in the Indian aviation sector stems from a combination of high operating costs, regulatory pressures, and taxation policies. Fuel costs stand out as a critical component, accounting for approximately 30% of an airline’s cost base. Thomsen expressed optimism that fuel costs might decrease in 2025, potentially providing a much-needed boost to profitability.

She also addressed the role of regulatory and taxation frameworks, particularly in emerging markets. Historically, airlines have often been treated as “cash cows,” but Thomsen believes India’s evolving approach to leveraging aviation for economic growth is a step in the right direction. “Using aviation as a lever for economic growth will be more profitable both for the country and for the airlines,” she stated.

Regarding airfares in India, Thomsen acknowledged the disparity between consumer perceptions and industry realities. While industry insiders claim India offers some of the lowest airfares among major markets, consumers often feel they are paying high prices. Thomsen attributed this discrepancy to perception and noted that airfares globally have not kept pace with consumer price inflation or rising jet fuel costs. A survey by IATA across over 100 countries confirmed this trend, highlighting the affordability challenges faced by airlines worldwide.