India passenger market seen set for fastest global growth

India passenger market seen set for fastest global growth

New Delhi: India’s airline passenger market could emerge as the world’s fastest growing, an aviation consultancy said on Thursday, as it forecast the nation’s private carriers would return to profit next year.

“India could be the strongest growth market in terms of passenger numbers globally for the next 10-15 years," Kapil Kaul, India chief of the Singapore-based Centre for Asia-Pacific Aviation said.

His comments came as the Singapore-based consultancy said in a report that India’s private airlines should return to profit in the next financial year after bruising losses.

With India’s economy rebounding, private carriers are expected to post a total profit of $250 million to $300 million in the fiscal year which starts in April, the report said.

After a turbulent couple of years, 2010 should be a more positive year for Indian aviation, provided that the airlines can remain disciplined on costs, capacity and pricing, the consultancy said.

“Now we are entering the profitable phase," Kaul said.

The private carriers include Jet Airways, SpiceJet, Kingfisher and Indigo, part of a clutch of new airlines which took flight earlier in the decade after India liberalised the sector.

The move opened the way for cheaper air fares and prompted many travellers to migrate to planes from trains.

The sector has been one of the most vibrant symbols of economic progress by the country of nearly 1.2 billion people. But it was buffeted by soaring fuel prices and then by the global slump which slowed the domestic economy.

But state-run flagship Air India will remain in the red, dragged down by high operational costs and a fall in passenger numbers.

Air India will continue to have cash deficits for the next five to seven years which could cumulatively amount to four-to-five billion dollars, the report said.

“Total sector losses for this year are expected to be up to $1.6 billion of which Air India will account for at least half," Kaul said.

The combined losses have narrowed from last year’s $2 billion of which Air India losses represented $1.2 billion.

As times turned tough, savage price wars also undermined the sector. But passenger growth now should outstrip capacity increases, helping profitability.

Domestic traffic is expected to post an expansion of 15% or more in 2010-11 as the industry returns to its long-term growth trajectory, the report said.

International traffic growth is seen growing by 10-12%.

Some 40 million passengers fly domestically annually and 30 million travel abroad. The centre projects domestic flier numbers will balloon to 150 to 180 million by 2020 while international passengers will top 50 million.

Kaul said $80 billion alone was expected to be spent by India’s airlines on buying new planes by 2020 while billions of dollars more would be spent on upgrading dilapidated airports and building new ones.

The most profitable segment was expected to be economy, the consultancy said.

The domestic market may become almost entirely low cost, it said.