After 2 years, airlines flying into profit zone

Bangalore/Mumbai: Airlines seem to be finally emerging from their two-year flight of turbulence when passenger traffic dipped, operating cost shot up due to higher oil prices and fares slipped to very low levels on sagging demand and competition.
Improving airline yields -- or net revenue per seat -- and load factors in the last three months are providing tailwinds to domestic carriers, which are steeped in losses, to fly towards profits.
And if the current trend continues through this month -- December -- then this quarter may see many local airlines breaking even or even making a small profit.
Sanjay Aggarwal, chief executive officer (CEO) of SpiceJet, said given the robust demand, his airline is expecting to record profits in this quarter.
"If the current demand trend persists then we will break even. Hopefully, we may even make some money in the current quarter," he said.
The budget airline had posted a loss of around Rs 18 crore in the December quarter last year due to the slump in domestic demand with the global economic meltdown.
Bigger rivals Kingfisher Airlines and Jet Airways had lost Rs 626 crore and Rs 236 crore respectively in the same quarter last year.
Going by Jet's performance in terms of load factor and yield till now, analysts said the Naresh Goyal-owned airline may also be able to achieve breakeven in the third quarter of this fiscal.
Anand Kumar and S Arun, analysts with Bank of America Merrill Lynch, said a good December will enable Jet to break even in the third quarter itself.
SpiceJet's Aggarwal said his airline's yields were up by around 25% over the last quarter. He said if today's favourable trend in load factors and yields does not reverse then it would be smooth flight for the local carriers in 2010.
An industry expert said the average load factor of airlines is currently hovering between 76% and 78% compared with 70% in the September quarter, while yields are higher by 15-20% over last quarter.
22/12/-09 Praveena Sharma & Ramiya Bhas/Daily News & Analysis

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Categories: Indian Aviation- In General Dec 2009