Frank Zappa once said, "A country's worth something if it has its own beer and airline." India fits the bill: it has four private airlines and a national airline. It even had an airline named after a beer a while ago.
With India's middle class growing steadily, spending by consumers will continue to drive India's air transport business. Yet, the withdrawal of Kingfisher AirlinesBSE -0.86 % reduced India's passenger fleet by nearly 68 aircraft in a matter of 18 months. The vacuum is reflected in the rise of ticket prices.
To fill the void, India needs at least two more committed and mature operators. India also needs 150 more singleaisle aircraft and 40 extra twin-aisle aircraft to cater to the increased demand in international skies. This infusion has to come from homegrown airlines rather than a foreign airline stepping in to eventually re-route ticket revenue into its own accounts.
While Etihad's acquisition of Jet AirwaysBSE -1.00 % will infuse significant investor interest in India, more 'brownfield' type of investments in airlines are unlikely, given that airline profitability globally is increasingly affected by a dramatic rise in costs and competition.
05/05/13 Mark D Martin/Economic Times
