Home' Asian Aviation : AAV March 2017 Contents 32 AsianAviation | March 2017
AS SOUTH ASIA’S TOP AVIATION EXPERTS GATHERED IN
MUMBAI for the most recent CAPA India Aviation Outlook summit,
the recent good news of profitable airlines ran squarely into the news
that fuel costs were on the rise, the country ’s aviation infrastructure
was still in dire straits, and cutthroat pricing was, well, cutting yields.
CAPA estimates the Indian aviation industry is expected to return
to the red with losses of US$250-300 million in 2017, and US$380-
450 million in 2018. The forecast also encompasses the International
Monetary Fund January 2017 outlook that warns risks to global
growth are skewed downwards. It is the downward pressure on
yields, combined with cost creep, that is expected to push consoli-
dated industry results back into the red.
“Although, it is a good sign that the industry returned to profitabil-
ity in 2016, on an industry and consolidated level, 2017 and 2018 are
staring at profitless growth with a downward pressure on yields and
inability to cover operating costs,” said Kapil Kaul, CAPA’s CEO for
South Asia. Pankaj Srivastava, the commercial director for Air India,
added that pressure on yields was due to excess capacity leading
to rock-bottom fares. Amit Agarwal, acting chief executive officer
and chief financial officer at Jet Airways, echoed that sentiment
and explained that while corporate travellers were returning, yields
continued to be under stress.
A significant dip in IndiGo’s profits in 2017 is expected and losses
likely to increase for Vistara, Air Asia India and Air India. “(Should)
fuel cross the US$60 a barrel mark, Q2 of 2018, will be the worst this
fiscal year,” said CAPA’s Kaul.
CAPA officials earlier explained that India will emerge as the
third-largest domestic market to overtake Japan behind the US and
China as it crosses the 100 million passenger mark this year with an
average growth of over 15 percent. “ The numbers are robust. IndiGo
had record profits, Jet Airways did a dramatic turn, SpiceJet on the
brink of closure turned around, GoAir and Air India Express made
remarkable progress,” said Kaul.
Around 650 aircraft are to be delivered within the next 10 years,
of which 30 percent will be replacements, CAPA estimates. Do-
mestic travel could grow by 25 percent in 2018 with 130 million
passengers. The pace of aircraft inductions in 2018 will be one of
the key drivers of traffic growth. “ This is however, subject to deliv-
eries of A320neos as committed on schedule and operators being
able to deploy them as planned as some operational challenges
are being experienced,” Kaul said.
Budget carriers will continue to dominate the Indian domestic
market, taking an 80 percent share by 2018, up from the present 65
percent. “IndiGo is expected to induct two aircraft every month till
March 2018 and the fleet size is expected to reach 160. Its market
share will reach 55-60 percent in two years and this will increase
the strategic compulsion for other airlines to expand fleets in order
to remain relevant in the market,” Kaul said. Of the 65 aircraft to be
delivered in 2018, 50 are for budget carriers. Indigo will take delivery
of more than two aircraft a month through to March 2018.
“ We recognize the domestic market is growing fast. We see this
more on the LCC front than the full-service carriers...Disadvantag-
es of being owned by government is we may not react (to market
conditions) as we’d like to,” said Air India’s Srivastava.
“Hybridisation of LCCs is increasingly visible in India as they
adopt global distribution systems. Codeshares and alliance will be
next,” said Kaul.
IndiGo, India’s largest domestic airline with 128 aircraft and one
of the world’s fastest-growing low-cost carriers, and Travelport, a
global travel commerce platform, late last year announced a strategic
partnership that would enable IndiGo to distribute fares and ancillary
products to Travelport-connected customers worldwide. This is the
first time that IndiGo has struck a deal with a global GDS. For IndiGo,
with access to a global presence across 68,000 portals, the move is
a logical extension of its distribution strategy.
“ This will allow us to reach new customers, both at home and
Aviation in India:
A Roller Coaster Ride
Lower fuel prices and a strengthening economy resulted in all of India’s
domestic airlines for the first time in a decade posting a combined profit of
US$122 million in 2016. AAV Contributor Neelam Mathews was at the CAPA
India summit in February and explains why that good news may be short-lived.
23/02/2017 5:19:35 PM
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