Flying on empty

New Delhi: Private airlines, who called off their strike threat after the government contemplated action, continue to argue they backed down because they didn’t want to inconvenience passengers, but maintain that their reasons for striking remain as valid today — a very high aviation turbine fuel price and high airport charges in the country. Much of this is untrue, and what the larger airlines are not saying is that there was a split in the Federation of Indian Airlines — under whose aegis the strike threat was announced — with the budget carriers unwilling to go along with the larger full-service carriers who, incidentally, also offer low-fare services.Indeed, just how justified the airline grievances are is best brought out by the sharp contrast in the performance levels of the two sets of airlines.
First, not everyone in the aviation business is making losses — it is the full-service carriers who are losing the most. Kingfisher lost Rs 243 crore in the latest quarter ending June 2009, Jet Airways lost Rs 225 crore while budget carrier SpiceJet made Rs 26 crore of profits. Indeed, as compared to the same period a year ago, Jet’s revenue’s are down 18 per cent while SpiceJet’s are up 15 per cent.
Interestingly, this has taken place while aviation turbine fuel prices in India, though much higher than those internationally, have fallen by almost half — from Rs 71,028 per kilolitre in Delhi in August 2008 to Rs 36,992 in August 2009. While this happened, Kingfisher’s revenues fell slightly, from Rs 1,398 crore in the quarter ended June 2008 to Rs 1,314 crore in the quarter ended June 2009; its losses rose from Rs 158 crore to Rs 243 crore in the same period. In the case of Jet Airways, while revenues fell 18 per cent, its profits of Rs 143 crore turned into losses of Rs 225 crore. SpiceJet’s revenues rose and its losses of Rs 129 crore in the June 2008 quarter got transformed into profits of Rs 26 crore. None of this jells with the argument often made by private airline companies — that since aviation fuel comprises around 40 per cent of costs, India’s higher aviation fuel costs are the reason for their losses. Also, airlines like Jet earn around 53 per cent of their revenues from international operations — all international flights get aviation fuel at international prices! In other words, it is difficult to argue that fuel prices are as critical as the airlines make them out to be — it is even more difficult to argue that the airlines were not aware of the differential between Indian and global prices, either when they first entered or when they began their expansion spree.
Of course fuel costs matter, but what matters more is how efficiently the airlines are managing other costs; if the plane is flying anyway, are they getting the maximum number of passengers they can, and so on. Once again, this is where the budget carriers score over their full-service counterparts. Air India has a passenger load factor (PLF) of 67.9 per cent, Jet Airways’ is around the same and Kingfisher’s is 72 per cent — SpiceJet, however, is 77.3, GoAir 85,1 and IndiGo 81.6 per cent (all figures for June 2009). That is, the budget airlines are getting in more passengers per flight. Since they have lower costs of flying, this means their costs per passenger seat are much lower than those of the full-service airline.
06/08/09 Surjeet Das Gupta/Business Standard

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Categories: Indian Aviation- In General Aug 2009