Indian Billionaires Fail to Turn Air-Travel Boom Into Profits

Even billionaires can’t figure out how to make money in Indian aviation.
Kingfisher Airlines Ltd., controlled by brewing tycoon Vijay Mallya, is expected to report a second-quarter loss today, following Kalanithi Maran’s SpiceJet Ltd. and Jet Airways (India) Ltd., the nation’s biggest carrier. All three company have also slumped more than 65 percent in Mumbai trading this year.
Indian airlines have failed to turn a 19 percent jump in passenger numbers into profits because of a price war, fuel taxes that average about 25 percent and the rupee’s 11 percent depreciation this year. State-owned Air India Ltd. can also offer below-cost fares after winning 32 billion rupees ($639 million) of government bailouts since a 2007 merger.
“We have a serious issue on hand and that is to address the viability of Indian carriers,” said Kapil Kaul, the Indian head for CAPA Centre for Aviation. The financial status of domestic carriers is “very fragile,” he said.
CAPA expects the nation’s airlines to lose about $2.5 billion in the year ending March, including losses of as much as $2 billion for Air India. Only closely held IndiGo, India’s biggest discount airline, may make a profit, Kaul said, without giving a precise forecast.
14/11/11 Karthikeyan Sundaram and Mehul Srivastava/Bloomberg/Business Week

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Categories: Indian Aviation- In General Nov 2011