Losses drive airlines to consolidation: Report

New Delhi: While growth in India’s domestic air travel has been one of the fastest, the rush by the airlines to augment capacity and grab market share has resulted in major losses for the industry. It is estimated that India’s airlines are likely to have posted a combined loss of over $500 million during FY07, says foreign brokerage CLSA.
However, mounting losses, shortage of resources like pilots and airport infrastructure, along with the need for capital to execute expansion plans, are driving consolidation as well as rationalisation among the airlines. Consolidation in the sector will pave the way for rational behaviour by the leading carriers and, therefore, it is expected that going forward yields are likely to improve in the domestic sector, says CLSA.
After the UB acquisition of strategic stake in Air Deccan, the airlines have stated that they will look to increase yields going forward to stem the burgeoning losses.
Besides operational synergies, Kingfisher is likely to use Air Deccan as the vehicle to utilise its wide-body aircrafts that are expected to be delivered from December 2007 onwards.
Post this acquisition, the two private airline groups — Jet-JetLite and Kingfisher-Air Deccan — will account for over 60% share of the domestic market. Along with Indian Airlines-Air India combine, more than 80% of the domestic market will be controlled by the three large groups.
11/06/07 Sanjeev Sharma/Economic Times

To Read the News in full at Source, Click the Headline

Categories: General Aviation Jun 2007