Indian aviation sector caught in 'perfect storm'
Indian airlines are caught in a "perfect storm" of big losses, high debt and falling demand, and need urgent help from the new government to make them high-flyers again, says an industry report.
The struggling sector was once a vibrant symbol of India's economic progress but it has seen its fortunes nosedive nose·dive
n.
1. A very steep dive of an aircraft.
2. A sudden, swift drop or plunge: Stock prices took a nosedive.
Noun 1.
..... Click the link for more information. due to over-expansion, costly fuel and cut-throat competition Cut-throat competition, also known as destructive or ruinous competition, refers to situations when competition results in prices that do not chronically or for extended periods of time cover costs of production, particularly fixed costs.
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"The industry now is at a very critical stage," said Kapil Kaul, India head of the Sydney-based Center for Asia Pacific Aviation, the consultancy which authored the report entitled Aviation Agenda for The Next Indian Government.
Sector losses for the fiscal year just ended in March 2009 are expected to nearly double from last year to 1.75 billion dollars, Kaul said.
That's a fifth of the losses of airlines globally of 8.5 billion dollars estimated by the International Air Transport Association.
"India?s contribution to this (loss) is significantly higher than the two percent of world air traffic for which it accounts," said the report.
The Indian industry's woes are highlighted by a slump in passengers. In April, the number of domestic passengers fell by 591,000 or 15.2 percent year-on-year, the fourth straight month of declines.
The figures are a far cry from earlier heady head·y
adj. head·i·er, head·i·est
1.
a. Intoxicating or stupefying: heady liqueur.
b. government forecasts that passenger growth would run at 25 percent annually until the end of the decade.
Passenger numbers were expanding by double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. when India's economy was booming. Cheap fares and increasing affluence among India's middle classes drove a migration from the country's antiquated train network to planes.
After the government opened India's skies to more competition in 2004, a clutch of new airlines took flight, revolutionising domestic travel in the country of 1.1 billion.
But then costlier oil pushed up air fares last year, sending many passengers back to trains.
Now the sector has also been hit by a slowing economy triggered by the global financial crisis, reducing business and leisure journeys.
"It needs to quickly restructure and the new government has to help them reduce high structural costs," Kaul told AFP (1) (AppleTalk Filing Protocol) The file sharing protocol used in an AppleTalk network. In order for non-Apple networks to access data in an AppleShare server, their protocols must translate into the AFP language. See file sharing protocol. , citing hefty jet fuel taxes.
There is also a need to allow more domestic airlines to fly internationally to boost revenues, Kaul said.
The Congress-led government should allow foreign airlines to take equity stakes in domestic airlines to give them access to fresh capital, he said, but to draw investment the carriers must clean up their balance sheets.
"Over-aggressive expansion" to grab market share is "partly responsible for the fiscal demise of the sector," the report said.
Flagship state airline Air India Air India (formerly Air-India, Hindi: ??? ??????) is the national flag carrier of India with a worldwide network of passenger and cargo services. is hurting the most. It's estimated to have racked up 800 million dollars in losses for the past year and debt of four billion dollars, the report said.
Air India, which flies internationally, merged with government-run domestic carrier Indian last year to become more efficient but its planes are flying emptier and passenger revenues are still falling.
Despite this, it still plans to take delivery this year of 26 new aircraft -- "a significant augmentation AUGMENTATION, old English law. The name of a court erected by Henry VIII., which was invested with the power of determining suits and controversies relating to monasteries and abbey lands. in capacity when the opposite would be more appropriate," said the report.
And India's two major private airline groups, Jet Airways Jet Airways (India) Ltd. is an airline based in Mumbai, India, operating domestic and international services. It operates over 330 daily flights to 50 destinations across the country and 6 overseas. and Kingfisher Airlines Kingfisher Airlines Limited is an airline based in Bangalore, India. It is a major Indian luxury airline operating an extensive network to 34 destinations, with plans for regional and long-haul international services. , also have hefty debts and big losses. Jet reported its third-quarter net loss more than doubled to 44 million dollars.
Rationalisation Noun 1. rationalisation - (psychiatry) a defense mechanism by which your true motivation is concealed by explaining your actions and feelings in a way that is not threatening
rationalization "is inevitable and desirable for the health of the industry," said Kaul, who believes India can only support two full-service carriers. He declined to say which should survive.
But the no-frills airline model offered by carriers such as Indigo Airlines IndiGo Airlines is a private domestic low-cost airline based in Gurgaon, India. It operates domestic services linking 14 destinations. Its main base is Indira Gandhi International Airport, Delhi. , which has bucked the falling passenger trend, could be the platform for future growth, he said.
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