A consistent rise in crude oil prices over the past eight months is likely to be a drag on India’s aviation traffic growth in 2018, said a senior official at airplane manufacturer Boeing.
The Indian aviation sector, one of the fastest growing in the world, will likely see a slower growth of 12 percent in domestic air traffic in 2018, Dinesh Keskar, senior vice president of sales Asia-Pacific and India, Boeing Commercial Airplanes, told reporters in New Delhi yesterday.
India’s domestic air traffic has had prolific growth in 2015 and 2016, rising 20-25 percent. That growth petered out to an extent and stayed under 20 percent in 2017.
The reason I have scaled down is due to the oil prices. We are seeing it touch high 60s [oil price in dollars per barrel]. It is the highest in four years and it has gone up by 60 percent in the last eight months.Dinesh Keskar, Senior VP Sales-Asia-Pacific and India, Boeing Commercial Airplanes
Oil prices have been on the rise on account of the winding down of a global supply glut. The Organization of the Petroleum Exporting Countries has been undertaking supply cuts, and recently, U.S. inventories have reduced significantly.
Brent crude oil briefly breached $70 per barrel and touched its highest level since December 2014 earlier this month.
Oil prices are closely monitored by Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, usually forcing an increase in air fares.
Keskar expects that the impact of rising crude prices could somewhat be mitigated by the stronger rupee.
Boeing had earlier said that India is expected to take deliveries of 2,100 new planes worth $290 billion in the next 20 years. This is over 5 percent of the total global demand of 41,030 aircraft.
Keskar reiterated that Boeing’s delivery forecast in India is “somewhat constrained” due to the infrastructural limitations of Indian airports.
With PTI inputs.