Tuesday, May 3, 2011

Jitters despite growth

Orient Aviation (Hong Kong)
Neelam Mathews
May 2011

India’s domestic airlines are preparing for a jolt this summer as ailing
national carrier, Air India, is giving the competition a run for its money
by offering special fares on over half its domestic routes during the
peak season.
While the Air India offer is aimed at improving seat load factors
to regain its faltering market share, airlines that barely improved their
bottom lines following two recession years, finding it difficult to keep
pace with rising fuel costs, are worried profits will be eroded as a result of
the fare war.
However, there is a degree of cautious optimism. “The Indian industry
is holding out with the growth rate in double digits,” said Dinesh Keskar,
president, Boeing India.
With fuel at $100 a barrel, aviation growth is forecast fall to 15% from
the present 21%. At $120, Boeing expects growth to be reduced further to
12%, said Keskar.
Crude prices have been at a two-and-a-half-year high of $122 a
barrel following the Libyan crisis, pushing jet fuel prices up by more than
30% worldwide. International airlines, having increased fuel surcharges,
will make outbound air travel from India about 15% more expensive this
In its 2011-12 aviation industry outlook, think tank, Centre for Asia
Pacific Aviation (CAPA) India, projected private carriers will post a combined
profit of $350-400 million for the financial year ending March 31, 2012.
State-owned Air India is expected to remain in the red with losses in
the range of $1-1.25 billion, assuming an average oil price of $85-95 per
The report predicts India’s carriers will raise $1.5 billion in equity and
order up to 200 new aircraft in 2011-12.
India has added over 300 commercial planes and 500 private jets and
helicopters in the past 10 years. More than 51 million domestic passengers
flew last year and that figure is growing. From 2009 to 2010 alone,
passenger traffic grew by 19%.
The boom triggered a rush for lucrative jobs for pilots and in the midst
of this growth corruption scandals emerged (see Regulating the flight
deck, page 4). Pilots, training schools and members of the regulatory
body, the Directorate General of Civil Aviation, have been implicated in
the revelations.
While this has exposed the failure of the operating system, problems
that plague the industry, such as lack of staff, are being recognized and
slowly addressed.
As India’s aviation industry struggles to set its house in order, plans for
getting its ailing infrastructure - airports, air traffic management systems,
heliports – also are on track.
It is estimated India will spend up to $30 billion on building its airport
infrastructure alone by 2020. Addressing key structural issues will be
vitally important if Indian aviation is to realize its potential in the aviation
industry. ■
Neelam Mathews
Contributing Editor
New Delhi

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