Air India: Airlines have 'very thin margins' due to inability to match revenue with costs

Air India director of finance Srinivasa Venkat, speaking at the CAPA - Airline Fleet and Finance Summit 2014, stated (26-Mar-2014) fare wars in aviation do not allow airlines to price tickets on a cost plus formula. He explained that as a result of bilateral agreements between regions, airlines will often "dump" capacity into a particular region, which will result in fare wars and declining revenue. Consequently, the aviation industry enjoys "very thin margins" due to its inability to match revenue with its costs. Mr Venkat further explained that in India, there are huge tariff wars going on both in the domestic and international markets, and airlines are unable to "bump up prices" to cover costs.