MUMBAI -- India's airlines are taking several measures to soften the impact of the rupee's recent plunge, including scrapping unprofitable overseas flights, accelerating plans to shift major maintenance work to India and trimming the number of foreign pilots.
"With the dollar at this level, we can't take artificial covers, so we are taking other initiatives," Jet Airways India Ltd. Vice President for Finance Mahalingam Shivkumar said.
The rupee, Asia's worst-performing currency, has lost about 19% to the U.S dollar and 10% against the euro in the past 12 months.
Indian carriers traditionally don't make large currency hedges because the ones which fly overseas are pretty much covered as they earn in dollars and make payments in the same currency.
However, the rupee's recent slide has made life difficult for the airlines, which have to pay monthly rentals to foreign plane leasing companies, aircraft maintenance charges, salaries to expatriate employees, overseas airport charges, fuel at international airports and overseas loan and interest repayments.
Jet, India's biggest carrier by marketshare, posted a foreign exchange loss of $11.7 million in the year ended March 31. It earned 35% of its revenue and incurred 45% of its expenditure in foreign currency in the year.
Among other Indian carriers, budget airline SpiceJet Ltd. is aiming to reduce the number of overseas pilots, while national carrier Air India Ltd. has already started trimming unprofitable overseas operations, senior executives at the two companies said separately.
Jet's Shivkumar said the company won't renew the contracts of expatriate pilots when they end in the next few months, and that they will be replaced with local pilots.
Expatriates are paid more than their local peers, with some getting their salaries in foreign currency through recruitment agencies.
About 500 expatriate pilots worked for Indian carriers in 2011, most of them employed by Jet Airways, according to latest available data.
Other Jet executives said the company is cutting loss-making flights to destinations such as Johannesburg, Colombo and Dubai, and that it is in talks with various overseas airports to cut landing and parking charges.
Maintenance, too, is a sizeable cost, taking up 5%-7% of airline expenses.
Both SpiceJet and Air India are trying to shift their major plane maintenance work -- which airlines typically do overseas -- to recently-set up local facilities.
SpiceJet, an executive said, is in advanced talks with GMR Infrastructure Ltd. for upkeep of its Boeing planes at the company's maintenance facility in the south Indian city of Hyderabad.
Air India already does its own engine support work for most of its narrow-body planes at a facility in west India. The airline is trying to expand the facility to include more engine types, said Prashant Sukul, joint secretary at India's aviation ministry.
Analysts, however, said these measures won't be enough.
For instance, a significant part of expenses is from fuel costs, which depends on international prices.
"Another large foreign exchange spend for any airline comes from overseas loan and interest repayments," said Mahantesh Sabarad, a Mumbai-based analyst with Fortune Equity Brokers (India) Ltd.
Airlines in India have in the past few years been pushed toward heavy losses, hurt by high jet fuel prices, rising interest rates and cut-throat price wars and some untimely expansion plans.
Sydney-based consultancy Centre for Asia Pacific Aviation estimates India's airlines will post a combined loss of up to $1.4 billion in the current financial year ending March 31, 2013.
