Aerial affairs to fly airlines to profits

New Delhi/Mumbai: Now that the masters of the Indian skies have found their match — Kingfisher-Air Deccan, Jet-Sahara, Air India-Indian Airlines — is it time for a tango to profit zone? With accumulated losses of over Rs 2,000 crore, the airline industry today is clearly destroying shareholder value. The good news is that the blood-letting will stop. The bad news? It might take almost two years before that happens.
The last three months have seen three instances of consolidation: Air India-Indian, Jet-Sahara and Kingfisher-Deccan. Between them, the trio commands 80% of domestic traffic. Industry-watchers feel this will help the sector emerge out of the red. Analysts and airline executives expect profits to kick in from the third quarter of 2008, with 2009 the year to watch out for.
The industry lost around $500 million in 2007 alone. A duopoly of aircraft suppliers, little control over fuel costs, monopoly of infrastructure providers, low entry barriers and fickle customers have scarred the aviation industry. So, conventional wisdom has it that fewer players should see an end to price wars.
11/06/07 Sudipto Dey & Amit Bhandari/Economic Times

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Categories: General Aviation Jun 2007