Domestic carriers fly into worry zone

Mumbai: Praful Patel, assuming charge at the civil aviation ministry on June 1, has his task cut out. The minister, in his second innings, will be overseeing an industry that’s staring at a cumulative loss of Rs 30,000 crore per year, largely contributed by the three full-service carriers — Air India, Jet Airways and Kingfisher.
According to the Centre for Asia-Pacific Aviation (CAPA), a Sydney-based sector researcher, the combined debt of the three could reach Rs 45,000 crore by the end of this fiscal. While Indian aviation industry accounts for 17% of global losses, it only accounts for 2% of global traffic. How did the trio fly into this air pocket?
Analysts point their fingers at the reckless expansions that Kingfisher and Jet undertook in both, the domestic and international sectors, without any real demand. The roller coaster ride of the aviation turbine fuel (ATF) prices didn’t help things. Some analysts even say that the egos of the promoters, too, played a part in this aviation drama.
With the economy on a roll, growing at 9% plus rates in the past few years, Jet and Kingfisher had set their standards a bit too high: they wouldn’t consider themselves as national players, if they didn’t have more than a dozen flight services per day between Delhi and Mumbai. Later, Kingfisher’s Vijay Mallya and Jet’s Naresh Goyal struck a chord of friendship, but the alliance, struck for reducing excess capacity last October, is yet to take off, said an analyst with a brokerage firm on the conditions of anonymity.
Analysts are not expecting any silver lining in the quarterly results of listed airline entities — Kingfisher and SpiceJet, a low-cost airliner. On Monday last, Jet announced a standalone net loss of Rs 402 crore for the full-year ended March 2009 compared with a net loss of Rs 253 crore in the previous year. It suffered losses mainly on the account of high fuel and other operating costs, and lower load factors resulting into lower revenues than expected. Jet has a debt of $3.1-billion.
01/06/09 Mithun Roy/Economic Times

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Categories: Indian Aviation- In General Jun 2009