The country’s second largest airline consortium by fleet size, controlled by Bangalore-based UB Group, has racked up losses of Rs776 crore in the first half this financial year, including some Rs350 crore Kingfisher Airlines Ltd lost in the six months through September, and the remaining losses accounted for by Deccan Aviation Ltd.
Under pressure: A Kingfisher Airlines aircraft.The accumulated losses for the airline, so far, are about Rs1,200 crore.
UB Group companies own Kingfisher Airlines as well as a 46% stake in Deccan Aviation, which runs low-fare carrier Deccan.
“The losses were basically because of the fuel prices and the low-cost airline selling tickets at ridiculous levels,” said a senior UB Group executive, who insisted not to be named. “Going forward, we will not have that problem, and the loads are picking as the season is in full swing.”
He declined a projection on the financials for the second half of this fiscal year.
With global crude oil prices already touching $100 (about Rs3,940) a barrel, analysts estimate the situation could get worse over oil fluctuations. Centre of Asia Pacific Aviation (Capa) estimates the losses for the airline industry in India will exceed Rs2,500 crore in 2007-08, compared with nearly Rs2,200 crore last fiscal year.
The UB official said Kingfisher Airlines and Deccan Aviation can expect to have a better quarter ahead given the consolidation in an industry where three airline groups have 80% share of the market.
“Where exactly we land we will know only after December, but would not be anywhere closer to the existing losses,” the executive said.
Kingfisher Airlines has reported a loss of Rs577 crore in 2006-07, its second year of operations, which was nearly double the losses in the previous year when it started operations in May 2005. The accumulated losses for Kingfisher Airlines, so far, are about Rs1,200 crore.
Deccan, on the other hand, has reported Rs173 crore and Rs253 crore for the first two quarters of this year, respectively.
Other airlines, too, are under tremendous pressure on revenues with break-even targets being pushed further.
Jet Airways India Ltd has so far reported a profit of Rs59.36 crore in the first two quarters this year, while state-owned Air India, run by the National Aviation Co. of India Ltd, is estimated to have lost about Rs600 crore in the same period.
The benefits of consolidation could begin next fiscal year, an aviation analyst said. “Perhaps by quarter three of 2008-09, turnaround could happen. Till that time, the airlines will have to continue to work with the government (to reduce taxes on fuel) to improve fundamentals,” said Capa’s Delhi-based analyst Kapil Kaul.
Kingfisher’s most recent losses were first reported by The Economic Times.