If consolidation in the aviation industry was supposed to stop airlines from bleeding, it's not happening.
Losses estimated to soar 50% to Rs 3,037.5 crore
BANGALORE: If consolidation in the aviation industry was supposed to stop airlines from bleeding, it's not happening.
The current performance of the industry is only signalling a further deterioration in its financial health.
Ankur Bhatia, executive director of travel conglomerate Bird group, estimates that the losses for this fiscal year could be closer to Rs 3037.50 crore ($750 million), 50% higher than last year's Rs 2,025 crore ($500 million).
According to him, one of the primary reasons for this is the rampant capacity addition on already over-served, metro to metro routes.
"The further capacity inductions on these routes cannot be digested at commercially viable fares. However, with the kind of aircraft (large -Boeing 737-800 and A320s) that airlines have ordered, they are all eager to serve metro routes. The non-metro routes do not have enough traffic to fill up large aircraft," Bhatia said.
This, he said, forces them to sell seats at unviable fares. eroding the profitability of the industry.
Bhatia said budget airlines like SpiceJet, IndigGo and GoAir, which are independent players, continue to dictate the direction of price in the industry.
"Earlier, it was Air Sahara and Air Deccan, which decided the price trend in the industry. Now, it is these smaller players that offer very low fares and other players have to follow them," said Bhatia.
So, unless these market spoilers get taken over or wrap up on their own, pricing power for players like Kingfisher Airlines, Jet Airways, Air Deccan and JetLite is still a long distance.
Bhatia does not see a turnaround for the industry in the foreseeable future.
"I don't see it happening in the near horizon," he said.
Bhatia, who is planning to start his own airline by the end of 2009, is currently evaluating various business models.
He is considering a regional airline in the North and is in the process of deciding the aircraft type. But looking at the condition of the industry, he is not in a big rush.
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