Wednesday, November 28, 2018

Can SpiceJet fly through the stormy weather?

Almost 115 million people took to the skies for domestic travel in the first ten months of the current calendar, up from near 95 million in the year before period, but revenues of airlines aren’t reflecting this heady 20 percent growth.

In fact, IndiGo Airlines has managed to grow revenues only by 16.9 percent in the second quarter. What’s more, in its presentation following its second quarter results, the market leader in domestic air travel revealed that revenue per average seat kilometer (RASK) declined 8 percent, even as costs per average seat kilometer (CASK) increased by over 13 percent.

One likely explanation for fares and revenues not rising in sync with volume growth is that IndiGo is playing for market share. With the state-run carrier, Air India, struggling to find a benefactor and private airline Jet Airways trying desperately to stay afloat, the industry leader is possibly playing to enhance its domination, and in the process driving others further to the fringes.

IndiGo has gained over 3 percent market share in domestic air travel between January and October this year, even as Air India (-1.1 percent), Jet Airways (-1.7 percent) and SpiceJet (-0,9 percent) have lost share.
28/11/18 CNBC TV18