By Gautam Chakravorthy, Bloomberg
Mumbai: Deccan Aviation Ltd., operator of India’s biggest low-fare airline, said its average revenue per passenger will probably increase more than 7 % by December, helping the company post an operating profit for the first time.
Air Deccan is Rs200 short of the Rs2,950 average revenue needed to become profitable by earning revenue from its main business, Managing Director G.R. Gopinath told reporters in Mumbai today, without giving a specific operating profit forecast for the fiscal second quarter. Deccan Aviation counts sales of car rentals, travel insurance, hotel rooms and advertising as part of its main business, he said.
Bangalore, India-based Deccan Aviation started by Gopinath, a former army captain and a silkworm farmer, pioneered low-fare flights in India by selling tickets priced as low as Rs1 to attract railway passengers. The response lured airlines such as Spicejet Ltd., Indigo and GoAirlines (India) Pvt. to enter the industry in the past two years, to tap passenger traffic that may grow 25 % annually for the next five years.
Deccan Aviation, which started operations in September 2003, has about 22 % of the market, while full-service airline Jet Airways India Ltd., the nation’s biggest domestic carrier that started in 1993, has about 25 %, Gopinath said.
Deccan Aviation shares, which declined almost a third this year compared with a 7 % fall in the benchmark Sensitive index, rose Rs4.4, or 5 %, to Rs92.4 at the close of trading on the Bombay Stock Exchange today.
The share of low-fare airlines is expected to reach 70 % by 2010, according to estimates by market researcher Centre for Asia Pacific Aviation.
Deccan Aviation’s share of ancillary earnings, from hotel bookings and similar services, may rise to 25 % of revenue in five years from 9 %, Gopinath said. Air Deccan sells advertisement space on the body of the aircraft and on seats to earn revenue. It doesn’t give passengers free food on board and customers have to pay to hear video programming.
The carrier employs 68 people to service an aircraft, compared with 118 by Jet Airways. State-run Indian Airlines, also a full-service airline, uses 420 people.
The carrier aims to fly 12 million passengers in the year starting 1 July 2008, 50 % more than its estimated passenger load in the current year ending 30 June.
Deccan Aviation had net income of Rs96.4 million in the three months ended 31 December, the company said in January. The profit, which was the company’s first since an initial public offering last year, was boosted by financing secured from two European lenders.
A probe by the nation’s airline regulator, Director General of Civil Aviation, into charges Deccan Aviation sold more tickets than seats on its flights, has been completed, Gopinath said. The local CNN-IBN television channel had said the airline was overbooking passengers, Air Deccan said in a statement last month, denying the charges.
“They’ve come and inspected our records last week,” Gopinath said. “It’s up to them to disclose the findings. Our system doesn’t allow overbooking hence the allegations are incorrect.”
The airline’s passenger reservation data may have developed glitches after Deccan Aviation changed its technology supplier in February, Gopinath said. The carrier hired Radix International in the last week of February in place of Interglobe Technologies Ltd.
“All data may not have been captured properly and there might have been some stray incidents,” Gopinath said.