Indian airlines set to cut losses as fares lift off

Author: 
Reuters New Delhi
ID: 
1550007592123588200
Thu, 2019-02-14 00:41

NEW DELHI: India’s airlines are poised to cut their cumulative
losses by as much as two-thirds in the financial year starting in
April, aviation consultancy CAPA India said on Tuesday, with
airline executives saying ticket prices are finally rising.

The consultancy’s forecast is for Indian carriers to lose a
collective $550 million to $700 million for financial year 2020,
including a return to profit by low-cost carriers, against an
estimated $1.7 billion loss for the 2019 year ending in March.
The latter figure is an improvement to CAPA India’s last forecast
for losses of up to $1.9 billion issued in September when oil
prices were higher.
“The opportunity exists to create a sustainable, profitable
future within 1-2 years,” CAPA India CEO Kapil Kaul said as the
forecast was released at its annual conference in New Delhi.
“This will drive serious investor interest given the size of the
market.”
A narrowing of losses will ease the pressure on Indian carriers in
financing the hundreds of Airbus and Boeing jets they have on
order. They are tapping rising demand from a growing middle class
in the world’s fastest-growing major domestic aviation market and
expanding operations internationally.
Domestic air traffic is forecast to rise by 14 to 16 percent in
financial year 2020, CAPA India said, with international traffic
set to be 10 to 12 percent higher as the Indian fleet expands by
more than 90 aircraft.

 

“We plan to expand international aggressively,” Ajay Singh,
SpiceJet chairman and managing director, told reporters on the
sidelines of the conference. “It is time to start looking at
narrowbodies for medium and long haul. The (Boeing 737) MAX allows
us to do that.”
Cut-throat competition has made India one of the world’s cheapest
domestic airline markets with deals such as $50 one-way tickets on
the two-hour flight from Mumbai to New Delhi. High fuel prices, a
weak rupee and intense competition dragged down airline financial
results for much of 2018.
But fares are on the rise with low-cost carriers IndiGo and
SpiceJet reporting higher yields and swinging to net profits in the
quarter ended Dec. 31 after losses earlier in the financial
year.
Vistara Chief Strategy and Commercial Officer Sanjiv Kapoor said
his airline had seen a significant improvement in pricing as
discipline returned to the market. “If oil remains below $65
dollars a barrel, the industry has a chance of recovery,” he
said. “Last year was not easy.”
Budget carriers, which include IndiGo, SpiceJet, AirAsia India and
GoAir, are expected to post a combined profit of $100 million to
$150 million in the 2020 year, whereas full-service carriers Air
India, Jet Airways Ltd. and Vistara will rack up $700 million
to
$800 million of combined losses, CAPA India said on Tuesday.
“We are very focused on improving our yields and margins,”
SpiceJet’s Singh said. “If fares increase by 10 percent demand
will not be affected, yields will get better and airlines’
financial health will be better.”
Jet Airways, which controls a sixth of India’s aviation market
and has net debt of $1.13 billion, is seeking a financial bailout
with money owed to employees, vendors and aircraft lessors. The
airline is in talks with shareholder Etihad Airways and key lender
State Bank of India for a rescue deal but for any proposal to be
accepted, its founder and chairman Naresh Goyal would need to give
up his controlling stake, sources have said.

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Source: FS – All-News-Economy
Indian airlines set to cut losses as fares lift off