5 reasons for hope
Why the beleaguered Indian aviation industry may get a breather from 2014
These are strange times for aviation in India. In February 2013, salt-to-software conglomerate Tata Group tied up with Malaysian budget airline AirAsia. A few months later, the Foreign Investment Promotion Board swiftly cleared the group's partnership venture with Singapore International Airlines (SIA) to start a full-service airline in India by mid-2014. But these events stood out against a gloomy backdrop. The clearance for the SIA deal came just two days after the country's second largest private airline, Jet Airways, announced its biggest ever quarter loss (Rs 891 crore) for the second quarter of 2013/14. Consultancy Centre for Asia Pacific Aviation (CAPA) estimates that Indian airlines collectively lost more than Rs 3,000 crore in that quarter.
Between 2007 and 2013, they lost Rs 53,648 crore, and losses for 2012/13 are pegged at Rs 10,429 crore. But Kapil Kaul, CEO of aviation consultancy CAPA (India and the Middle East), says the tide will turn in 12 to 18 months. "Post 2014/15, the industry will see a better operating environment and will return to sustainable growth," he says.
That may seem hard to believe when the industry is grappling with high aviation turbine fuel (ATF) prices - oil prices have hovered around their peak of $110 a barrel - as also slack demand and rupee depreciation. The last is especially painful for a business in which 75 per cent of costs are dollar-denominated. All these issues have led to softening of yields per seat, an important measure of an airline's health. For Jet, yields for the second quarter dropped 11 per cent to Rs 7,376 from Rs 8,335 in the corresponding quarter of the previous year.
Between 2007 and 2013, they lost Rs 53,648 crore, and losses for 2012/13 are pegged at Rs 10,429 crore. But Kapil Kaul, CEO of aviation consultancy CAPA (India and the Middle East), says the tide will turn in 12 to 18 months. "Post 2014/15, the industry will see a better operating environment and will return to sustainable growth," he says.
That may seem hard to believe when the industry is grappling with high aviation turbine fuel (ATF) prices - oil prices have hovered around their peak of $110 a barrel - as also slack demand and rupee depreciation. The last is especially painful for a business in which 75 per cent of costs are dollar-denominated. All these issues have led to softening of yields per seat, an important measure of an airline's health. For Jet, yields for the second quarter dropped 11 per cent to Rs 7,376 from Rs 8,335 in the corresponding quarter of the previous year.
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