Demand takes off, but capacity yet to take flight

Mumbai, Bangalore: The wide chasm between the demand and supply in the airline industry is closing, but not all airlines are rushing to expand their capacity.
After having burnt their fingers in the glut between 2006 and 2008—sinking into a loss of over Rs 9,000 crore—domestic carriers are being cautious about their expansion plans despite strong demand returning.
Samyukth Sridharan, chief commercial officer of SpiceJet Ltd, says his airline is not getting carried away by the recent spurt in domestic air travel and is sticking to its plans of inducting five more aircraft this year.
“Yes, if you look at the last quarter, demand is closer to supply but airlines are still cautious and are not aggressively expanding their fleets. Talking about ourselves, we inducting only those aircraft which are in the pipeline,” he said.
Sridharan said the budget carrier was looking at placing new orders for planes but not in immediate future.
Another industry expert said most airlines were shying away from swelling their capacity because the demand is still very price-sensitive and any shift in the supply would intensify the fare war and disrupt their flight to profitability.
“Airlines would be jeopardising their chances of turning around during the current fiscal if they expand now. Demand is very price-sensitive and is not sustainable,” he said.
According to him, every airline is reacting differently to the current jump in demand depending on the extent of red blot on its balance sheet.
04/05/10 Neha Rishi & Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General May 2010