India's aviation sector caught in 'perfect storm'

New Delhi: India's airlines are caught in a "perfect storm" of big losses, high debt and falling demand, and need urgent help from the new government to make them high-flyers again, says an industry report.
The struggling sector was once a vibrant symbol of India's economic progress but it has seen its fortunes nosedive due to over-expansion, costly fuel and cut-throat competition.
"The industry now is at a very critical stage," said Kapil Kaul, India head of the Sydney-based Center for Asia Pacific Aviation, the consultancy which authored the report entitled Aviation Agenda for The Next Indian Government.
Sector losses for the fiscal year just ended in March 2009 are expected to nearly double from last year to 1.75 billion dollars, Kaul said.
That's a fifth of the losses of airlines globally of 8.5 billion dollars estimated by the International Air Transport Association.
"India's contribution to this (loss) is significantly higher than the two percent of world air traffic for which it accounts," said the report.
The Indian industry's woes are highlighted by a slump in passengers. In April, the number of domestic passengers fell by 591,000 or 15.2 percent year-on-year, the fourth straight month of declines.
The figures are a far cry from earlier heady government forecasts that passenger growth would run at 25 percent annually until the end of the decade.
Passenger numbers were expanding by double digits when India's economy was booming. Cheap fares and increasing affluence among India's middle classes drove a migration from the country's antiquated train network to planes.
After the government opened India's skies to more competition in 2004, a clutch of new airlines took flight, revolutionising domestic travel in the country of 1.1 billion.
But then costlier oil pushed up air fares last year, sending many passengers back to trains.
Now the sector has also been hit by a slowing economy triggered by the global financial crisis, reducing business and leisure journeys.
24/05/09 Penny MacRae/AFP

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

Categories: Indian Aviation- In General May 2009