Soaring competition in domestic skies cuts into profits

New Delhi: With increasing competition in domestic skies, the profitability of the domestic airline industry is under tremendous pressure as almost all operators are reported to be making losses, according to the pre-budget Economic Survey 2007-08 presented in Parliament on Thursday.
“Given the intense competition among the airlines and the declining margins, a process of consolidation is perhaps inevitable.” The process has already commenced, and the recent mergers and acquisitions in the public and private sectors are expected to enable the airlines to increase revenues through synergies in operations and by ensuring optimal utilisation of resources in this capital-intensive sector.
After the merger of the national carriers Indian Airlines and Air India into the National Aviation Company of India Limited, the new brand entity Air India is expected to provide an integrated international and domestic footprint, which will enhance options to the customer, improve load factors and yields on commonly serviced routes and allow easy entry into one of the three global alliances.
Noting that the civil aviation sector underwent dramatic expansion during X Plan period, the Survey says the rapid growth of the economy, especially during the last four years, has been accompanied by a sharp increase in the volume of air traffic.
29/02/08 Vinay Kumar/The Hindu

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Categories: Indian Aviation- In General Feb 2008