End of the day, airlines in India will have to do the juggler’s act by somehow balancing factors like capacities and airfares, apart from adopting a slew of fuel-saving, cost-cutting exercises.

At $147.27 (rs 6,259) a barrel on July 11, price of crude oil not only touched an all-time high by more than doubling in the past one year, but also came dangerously close to crossing the psychological barrier of $150 (Rs 6,373). Even though prices have somewhat stabilised at around $125 (Rs 5,311) a barrel now, it is anybody’s guess as to which way the needle will swing in future. However, it can be said with more than considerable certainty that the days when crude oil traded below $100 a barrel seem never to return again. Airlines the world over, which had just come out of the shadows of the 9/11 recession to collectively post a net profit of $5.6 billion (Rs 23,794 crore) in 2007, have once again plunged below their financial bottomlines. The International Air Transport Association (IATA) in July said fuel prices would force the airlines into a net loss of $2.3 billion (Rs 9,773 crore) this year. Even that estimate is based on an old oil price of $106.5 (Rs 4,524) for a barrel of Brent Crude—an actual higher price punishes the sector even harder. In addition, the resulting inflationary pressures and the economic slowdown have had a devastatingly cascading effect on the civil aviation sector.

Globally, the sting of rising fuel prices has been more pronounced in the US, where the economic slowdown has compounded the distress. The American industry’s seven biggest carriers reported operating losses of 5.2 per cent in the first quarter of the year. Airlines have had to resort to restructuring, including mergers, capacity and job cutting. The US predicament has spread across the Atlantic with three of the four business-class-only airlines folding up in recent months. IATA has warned of more bad news to follow. Director General and Chief Executive Officer Giovanni Bisignani told airlines belonging to IATA, For every dollar the price of oil goes up, costs go up by $1.6 billion (Rs 6,797 crore). He further pointed out that 24 airlines had gone under in the past six months, despite a steady streamlining in the years since 2001. The situation is desperate, he said, calling for governments to remove the regulation that prevents consolidation.

Back home in India, the scenario appears to be somewhat different. While the only business-class-only Paramount Airways seems to be somehow chugging along with its operations restricted by and large to the southern region, it is the low-cost model that has been scalded by the prices of crude oil. Take the case of SpiceJet which, according to its chairman, is posting daily losses of Rs 50 lakh to Rs 75 lakh on high jet fuel prices, forcing it to cut routes and delay plane deliveries to trim losses. Another case is that of Jet Airways, which reported a loss of Rs 221 crore for the fourth quarter of 2007-08, against a net profit of Rs 88 crore for the same period last year. The airline showed a consolidated loss of Rs 654 crore ($135 million) for the full year, mostly contributed by its low-cost subsidiary, Jetlite.