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After fare war, airlines set to bleed in third quarter

Saturday, 18 January 2014 - 9:30am IST | Place: Mumbai | Agency: DNA
Stare at a collective loss of Rs 1,600 crore

Domestic carriers, including Jet Airways and SpiceJet, may report yet another quarter of losses for October-December, 2013, owing to high operational costs and high discounting of fares.

According to a latest report by Center of Asia Pacific of Aviation (Capa), the total estimated losses for domestic carriers are expected to be Rs 1,065-1,600 crore, despite the third quarter being the strongest quarter traditionally for airlines on account of festive period.

In September 2013 quarter, Indian airlines collectively lost over $500 million (Rs 3,000 crore).

As per the estimates, Jet Airways may report a loss of Rs 400-500 crore, while SpiceJet may witness a loss of Rs 170-215 crore in the December quarter.

Air India may post a loss of Rs 900-1,100 crore during the period.

“When the industry is reporting significant losses in peak season it is clear that the domestic Indian aviation market has a fundamental problem with viability,” the report said.

Fall in rupee, higher fuel prices and pricing pressure led to a worst-ever quarterly loss of Rs 891 crore for Jet in July-September quarter, while SpiceJet reported a loss of Rs 559 crore during the same period.

With continuing losses, Capa estimates that Jet and SpiceJet may witness record full-year losses. “Every carrier is expected to post losses in the current fourth quarter based on current trends and a fare war is not ruled out in February/March 2014, which will likely result in Jet Airways and SpiceJet reporting record full year losses for the 12 months ending March 31, 2014,” said the report.

With mounting losses, Capa said that Jet is expected to burn through almost the entire capital generated from the 24% stake sale to Etihad.

According to experts, the challenges would continue for domestic carriers in the coming fiscal even as new airlines would intensify the competition.

“New entrants including AirAsia India, Tata‐Singapore Airlines and Air One are expected to add around 20 aircraft to the domestic market in fiscal 2015,” the report said.

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