The International Air Transport Association (IATA) on Tuesday warned of tough times for the global airlines industry owing to the financial turmoil in Europe and the US.

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Closer home, the situation isn’t much different though the cause-and-effect components certainly are.

IATA forecast a 29% fall in airline profits in 2012 to $4.9 billion from a likely $6.9 billion this year.

It expects margins to be an insignificant 0.8%, lower than 1.2% expected this year, as developed economies shift to stall speed.

Airlines in India, on the other hand, remain entrenched in the vortex of  pyrrhic price wars, shrinking yields and pricey fuel amid a fairly growing economy.

The upshot: analysts are beginning to revise share price targets of airlines, saying it’s a time to jettison investments.

Jamshed Dadabhoy and Arvind Sharma, analysts with Citigroup, on Monday maintained their ‘sell’ call on Jet Airways.

But this time, they lowered their share price target two-thirds to Rs230 from Rs696.

High competitive intensity, which is resulting in moderate pricing power and thus lower yields, elevated crude oil prices and exacerbated debt are impacting margins for all airlines, they said in a note.

To boot, a rapidly depreciating rupee is leading to increased payments for fuel and aircraft rentals, and of course there are some highly leveraged balance sheets.

Almost a fortnight back, Neeraj Monga, analyst with Veritas Investment Research Corp of Toronto, Canada, along with Varun Raj said Kingfisher’s book equity has been wiped out, and the airline is burning cash at a rapid rate.

It is in a business which requires capital perpetually and Kingfisher has no pricing power, they had contended.

Top officials of Kingfisher later refuted the contention.

But if scuttlebutt on the street is to be believed, the Vijay Mallya-led airline is likely to make some important announcements at its annual general meeting in Bangalore on Wednesday.

An analyst from a domestic brokerage expects all three listed players — Kingfisher Airlines, SpiceJet and Jet — to deliver weak results for the September quarter.

“I expect SpiceJet to show a loss at the operating profit, or Ebidta, level. Ditto Jet, in its domestic business. What could help Jet,  however, is its international operation and proceeds from the land deal in the Bandra Kurla Complex. Also, aircraft sale and leasebacks generated cash flows for the airline,” he said, refusing to be named.

“The main issues with SpiceJet are capacity expansion, the impact of predatory pricing by Air India on domestic routes and crude buoyancy,” he added.

In the short term, analysts expect Air India’s aggressive pricing — it’s offering half the fares of full-cost carriers — to be a huge dampener. Dadabhoy and Sharma said this would reflect in Jet’s September numbers.

For the past few months, following major flight cancellations owing to a prolonged pilot strike, Air India has been offering attractive fares to claw back spoils.

Latest data from the Directorate General Of Civil Aviation show, Air India has indeed been successful in its strategy. In August, it notched up a market share of 17.4%, 90 basis points more than 16.5% in July.

Full-cost carriers Jet and Kingfisher have also been facing relentless competition from low-cost rivals. In August, Kingfisher enjoyed an 18.8% market share, a whit more than low-cost Indigo, which is flying neck and neck with 18.7%.    Turn to Page 10