Mumbai: Private domestic airlines are expected to make a combined profit of $250-300 million (Rs1,170-1,404 crore) as early as the fiscal year ending March 2011, but it will take them longer to wipe off accumulated losses, a report by consulting firm Centre for Asia Pacific Aviation (Capa) said on Tuesday.
Back in business: Upgrades to airports and airspace will enhance passenger experience and let airlines achieve faster turnarounds. Virendra Singh Gosain / HT
Capa estimated that domestic yields—a measure of the average fare paid per mile per passenger—could increase by 5-7% in fiscal 2011. Yields could increase by as much as 10% in the third quarter of fiscal 2011, making it the most profitable period.
“Maintaining yields will be (the) key and it was the loss of focus on this parameter that has contributed to the industry’s current difficulties,” the report said.
Capa’s projections are based on estimated 15% growth in domestic traffic in that period and a 10-12% growth in international passenger traffic.
“Indian aviation can fly back to profitability zone as the economy develops,” said Charles Dhanaraj, associate professor of management at the Kelley School of Business at Indiana University, Indianapolis, and an expert on the Indian aviation industry.
He warned that hyper competition could cause more damage to the industry, which lost an estimated $2 billion in the last fiscal year and is forecast to lose as much more in the current year.
The Capa report suggested that India’s largest private carrier, Jet Airways (India) Ltd, and second largest low-fare airline SpiceJet Ltd would achieve a full-year profit in fiscal 2011. Kingfisher Airlines Ltd would achieve profitability only in domestic operations in that period.
The outlook for India’s national carrier Air India, which is operated by the National Aviation Co. of India Ltd, (Nacil), remains grim. Capa says the state-run airline would continue to post a loss because its restructuring would likely result in labour problems at various levels.
On 10 December, Mint reported that most domestic carriers were looking forward to a better, even profitable, fiscal 2011 on the back of their own cost-cutting measures and an increase in passenger traffic.
Meanwhile, the operating environment is also improving, with upgrades to airports and airspace, and ground access being developed, which will enhance the passenger experience and let airlines achieve faster turnarounds and higher aircraft utilization, Capa said.
“In India, the expected growth did not materialize post-2005. Partly, this has been more an infrastructure problem than an industry issue,” Dhanaraj said. “The non-availability of the airport infrastructure is a major constraint for the market to grow,” he added.
An integrated transport system that enables commuting by high-speed rail or a dedicated corridor from the airport to the city will be essential for unleashing demand in tier I cities and new airports will be needed in tier II cities “to make the real take-off,” he said.