Smaller airlines turn on the capacity binge

Mumbai/Bangalore: Domestic airlines may again be flying the route to turbulence. Despite slipping demand and excess supply in the market, local carriers are adding capacity even as they are reducing fares on booking made 30 days in advance.
This, industry experts and airline executives say, will further shrink yields that are already showing a downhill trend in January and February.
"Excess capacity and lower fares in the industry are hurting all of us. The average industry yield in January was around Rs 4,500 per passenger. It fell to about
Rs 3,800 per passenger in February. We are expecting it to fall further in March, which is a lean month," said a senior executive of a budget airline.
He said at the current capacity level, all domestic routes were over-served. "There are 55-60 flights on the Delhi-Mumbai-Delhi routes while the demand on this sector is for just 35 flights. The situation is the same on all the routes," the executive said.
Kapil Kaul, CEO of Centre for Asia Pacific Aviation (CAPA), South Asia, feels the industry needs to cut capacity by 8-10%, especially in the full-service carrier segment.
Interestingly, the industry is saddled with excess capacity even after some airlines have cut extra flab. That's because demand has only been dipping. The number passenger flown by airlines in February was over 6.5% lower than in the same month last year.
An industry source said some of smaller airlines such as GoAir, SpiceJet and IndiGo were adding capacity to gain critical mass and narrow the gap between them and bigger players such as Jet Airways and Kingfisher Airlines. No-frills airline SpiceJet has expanded its fleet size from 15 aircraft last October to 19 at present and increased number of flights by a fifth in the last three months.
26/03/09 Archana Shukla & Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General Mar 2009