Indian airlines have fallen on hard times, battered by soaring oil prices and a weak rupee in recent months.
They may be getting some relief with crude prices softening over the past few weeks, but there remain challenges for the sector in a fiercely competitive market, analysts say.
“These are difficult times and definitely it’s a rough patch,” says Mark Martin, the founder and chief executive of Martin Consulting, an aviation consultancy.
India’s aviation sector supports 7.5 million jobs directly and indirectly in the country and makes up 30 billion rupees (Dh1.56bn) of its gross domestic product, or 1.5 per cent of the economy, according to the International Air Transport Association.
There are seven major airlines that dominate the market, with three full-service companies including the debt-laden, state-owned Air India, and budget operators such as IndiGo and SpiceJet.
With so many airlines, there is rising competition, and as companies add more flights, it has become increasingly difficult to be profitable.
“We have this double whammy of declining yields and increasing costs,” says Binit Somaia, the South Asia director at Capa Centre for Aviation. “We’re seeing an unprecedented increase in capacity on domestic routes, increasing by about 20 per cent year-on-year. Trying to fill a 20 per cent additional capacity is likely to be difficult unless you reduce fares.”
The rise in fuel prices coupled with the depreciation of the rupee meant that the third quarter, which is traditionally a low season for India because of monsoon rains, was particularly difficult for Indian airlines.
25/11/18 Rebecca Bundhun/National
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They may be getting some relief with crude prices softening over the past few weeks, but there remain challenges for the sector in a fiercely competitive market, analysts say.
“These are difficult times and definitely it’s a rough patch,” says Mark Martin, the founder and chief executive of Martin Consulting, an aviation consultancy.
India’s aviation sector supports 7.5 million jobs directly and indirectly in the country and makes up 30 billion rupees (Dh1.56bn) of its gross domestic product, or 1.5 per cent of the economy, according to the International Air Transport Association.
There are seven major airlines that dominate the market, with three full-service companies including the debt-laden, state-owned Air India, and budget operators such as IndiGo and SpiceJet.
With so many airlines, there is rising competition, and as companies add more flights, it has become increasingly difficult to be profitable.
“We have this double whammy of declining yields and increasing costs,” says Binit Somaia, the South Asia director at Capa Centre for Aviation. “We’re seeing an unprecedented increase in capacity on domestic routes, increasing by about 20 per cent year-on-year. Trying to fill a 20 per cent additional capacity is likely to be difficult unless you reduce fares.”
The rise in fuel prices coupled with the depreciation of the rupee meant that the third quarter, which is traditionally a low season for India because of monsoon rains, was particularly difficult for Indian airlines.
25/11/18 Rebecca Bundhun/National
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