Airline industry seeks to battle overcapacity

At a time when the aviation sector is looking at cost cutting measures to fly through the slowdown, the excess capacities built over the years have come under glare.

Experts participating in Routes Asia 2009 in Hyderabad felt that there is an immediate need to look at the overcapacity that has been built over a period of time, to keep the aviation industry going during the current difficult times.

“It is a fact that there are overcapacities in the sector. Today there is no route in the country that is viable for an operator. It’s time everybody puts the act together to tackle the issue and find a right solution,” Kapil Kaul, CEO of Centre for Asia Pacific Aviation, said. Saroj Dutta, executive director of Jet Airways, suggested that the capacities in general have to cut by about 10%.

“Excess capacity is an issue that’s bothering everyone and Jet Airways is also looking at it,” Dutta said.

According to him, many airlines are flying with a load factor of about 60-65% while the break even would be achieved with a load factor of 80-85%.

“There is a clear gap of about 15% and the only option is to cut back the capacities since there can’t be any further increase in the fares,” he said.

Union civil aviation secretary M Madhavan Nambiar said that the airlines have to be innovative in tackling the issue and suggested that the focus on Tier II cities would help create fresh demand.

“With the opening of the domestic skies, there has been some improvement in this situation. But, we are still forced to keep in place the Route Dispersal Guidelines to ensure connectivity to our far-flung and strategic areas. Our aim should be to ensure that the country is served to its full potential without a nudge or a push from the government,” Nambiar said.