Airline firms still grappling with overcapacity

Mumbai/Bangalore: Full service carriers may have aggressively shed capacity over the last one year -- Jet Airways has snipped 30% capacity in the last 12 months while Kingfisher Airlines cut back about 20% in FY09 -- but overcapacity still plagues the industry saddled with losses of over Rs 8,000 crore ($2 billion).
In the airline industry, capacity is measured by the number of seats or aircraft with an airline, or available seat multiplied by the number of kilometres it flies. As long as there is excess supply in the market, it would be difficult for airlines to wipe out the red from their
balance sheet.
Ankur Bhatia, managing director of Amadeus, said last month's average seat load factor of 70-75% indicates that demand is still lagging behind supply by 25-30%.He said the ideal seat load factor for airlines at the current yield -- net revenue per seat -- which has slipped 5-6% in the last four months, would be a high 90%.
But with the three full service carriers (FSCs) Jet, Kingfisher and state-owned Air India planning to gradually convert a large part of their business seats into economy seats, capacity situation in the market is expected to get worse in the coming months.
02/09/09 Ramiya Bhas & Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General Sep 2009