New Delhi: With the focus of full service carriers like Air India, Jet Airways and Kingfisher Airlines shifting to low cost carrier (LCC) model, the “Indian airline earnings outlook looks increasingly challenged,” according to an aviation consultancy CAPA.

Domestic losses in India are expected to rise in the second quarter to 30 September 2009, and “the earnings outlook beyond that is also questionable for full service and LCC carriers alike,” Centre for Asia Pacific Aviation (CAPA) said in a recent report.

By the third quarter, when all full service airlines would bring a significant part of their operations under the low-cost model, yields can be expected to fall even further while industry over-capacity is still an issue, the consultancy noted.

Everyone will be an LCC by the third quarter and everyone stands to lose, it said.

“The problem for the incumbents (full service carriers) is they are entering the LCC sphere with still-higher cost structures relative to their peers, while their mainline operations remain subject to intense competition. The problem for the LCCs is that everyone is now moving to imitate them,” CAPA said.

Air India recently announced that its low-cost entity Air India Express, which only has international operations currently, will commence domestic flights in the winter season. It will take away over a quarter of Air India’s domestic flight schedule.

Jet Airways has already shifted almost half of its flights to its low-cost service brand Jet Konnect and plans to mount more of its flights onto the brand in October.

Even Kingfisher has brought a huge number of flights under its low-cost service Kingfisher Red and plans to further enhance it.

LCCs currently account for about 55% of the domestic aviation market.