The aviation sector is in a mess and the airlines are at fault.
Barring IndiGo, all the companies are running at a loss. Most have high debts on their balance sheets and at least one of the airlines is nearly bankrupt.
Kapil Kaul of the Centre for Asia Pacific Aviation (Capa) said the airlines were “too aggressive”, trying to double their capacity between 2004 and 2008. Also, none of the companies planned their business rationally, he said.
“Airlines needed 3-3.5 aircraft during that period,” Kaul said. “But they added 6-6.5. Several airlines ordered hundreds of aircraft and they are in the pipeline for delivery. But there is no clear funding plan.” Kaul said the airlines refuse to accept that the aviation infrastructure in the country is weak. “They do not have any business plan that could cushion the effect of fuel price hikes.”
Though most airlines have rationalised capacity, they continue to lose money with every flight. Capa estimates say the industry could add more than $2.5 billion in losses to the accumulated loss of $6 billion. If Air India goes ahead with its plan to buy 27 Boeing 787 aircraft, the losses this fiscal could go up to $4-5 billion. At present, the industry is saddled with a debt of $16 billion; foreign exchange fluctuations keep the figure changing.
18/11/11 Sindhu Bhattacharya/Daliy News & Analysis
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