Indian airlines lose altitude in price war

New Delhi: India’s private airlines began the year optimistically, as soaring passenger numbers raised hopes that profits were finally on the horizon. But while Indians are flying in record numbers, the airlines are still bleeding red ink, wounded by surging fuel prices and fierce price wars with ailing state carrier Air-India.
Already burdened with years of accumulated losses, the private airlines are battling for survival, and some of the weaker ones could be forced out of business even as Air-India – the most indebted of all – is kept aloft by a taxpayer-funded lifeline.
“Some of these airlines are at a critical stage,” said Kapil Kaul, the south Asia chief executive of the Centre for Asia Pacific Aviation.
Air-India, which has estimated debts exceeding $9bn and is expected to lose another $1.5bn this year, was forced by a pilot strike to ground most of its domestic flights for 10 days earlier this year. Since then it has fought back by cutting its domestic fares by between 15 per cent and 20 per cent.
Industry executives say the fare-slashing by Air-India – which received $425m in government handouts in the past two years and is looking for more – has pressured private airlines to hold down their own fares even as more crowded planes should have brought them greater pricing power.
04/10/11 Amy Kazmin/Financial Times

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Categories: Indian Aviation- In General Oct 2011