Airline yields finally set to take off

Bangalore: Last fiscal, even when the demand was rising and airlines were registering high load factors, stiff competition in the sector had kept the average fares or airline yields — net revenue per passenger — low.
One of the reasons for the fare war was that full service carriers (FSCs) like Kingfisher Airlines, Jet Airways and state-owned Air India were migrating a lot of their seat capacity to low fares.
The market was suddenly flooded with low-fare seats, which pushed down the average fare earned by airlines from passengers. This, pretty much, remained the trend for the entire last fiscal and the first quarter of fiscal 2011.
That, however, is changing now. Airline experts and analysts believe with the sustained robust demand and lower fare rivalry, yields could inch up a little this year.
“For long, we have been waiting for the right opportunity to improve our yields but despite climbing demand and capacity rationalisation, we were not able to do it till now. Though, we will be able to firm it up by 8-10% (Rs250-300 per passenger) in the next one year,” said a senior airline executive, who did not want to be named.
He said higher yields will help air carriers to shore up revenues and eventually expand profitability if costs remain reined in.
Rakesh Shah, analyst with ICICI Securities, in his report brought out on Monday also expects airline average yields to improve 7-10% for local airline operators during the next two years.
22/09/10 Daily News & Analysis

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Categories: Indian Aviation- In General Sep 2010