India's airlines are poised to cut their cumulative losses by as much as two-thirds in the financial year starting in April, aviation consultancy CAPA India said on Tuesday, with airline executives saying ticket prices are finally rising.
The consultancy's forecast is for Indian carriers to lose a collective $550mn to $700mn for financial year 2020, including a return to profit by low-cost carriers, against an estimated $1.7bn loss for the 2019 year ending in March.
The latter figure is an improvement to CAPA India's last forecast for losses of up to $1.9bn issued in September when oil prices were higher.
"The opportunity exists to create a sustainable, profitable future within 1-2 years," CAPA India CEO Kapil Kaul said as the forecast was released at its annual conference in New Delhi."This will drive serious investor interest given the size of the market."
A narrowing of losses will ease the pressure on Indian carriers in financing the hundreds of Airbus SE and Boeing Co jets they have on order.
They are tapping rising demand from a growing middle class in the world's fastest-growing major domestic aviation market and expanding operations internationally.
Domestic air traffic is forecast to rise by 14% to 16% in financial year 2020, CAPA India said, with international traffic set to be 10% to 12% higher as the Indian fleet expands by more than 90 aircraft.
"We plan to expand international aggressively," SpiceJet Ltd chairman and managing director Ajay Singh told reporters on the sidelines of the conference. "It is time to start looking at narrowbodies for medium and long haul. The (Boeing 737) MAX allows us to do that."
Cut-throat competition has made India one of the world's cheapest domestic airline markets with deals such as $50 one-way tickets on the two-hour flight from Mumbai to Delhi.
High fuel prices, a weak rupee and intense competition dragged down airline financial results for much of 2018.
But fares are on the rise with low-cost carriers IndiGo and SpiceJet reporting higher yields and swinging to net profits in the quarter ended December 31 after losses earlier in the financial year.
Vistara chief strategy and commercial officer Sanjiv Kapoor said his airline had seen a significant improvement in pricing as discipline returned to the market.
"If oil remains below $65 dollars a barrel the industry has a chance of recovery," he said. "Last year was not easy."
Budget carriers, which include IndiGo, SpiceJet, AirAsia India and GoAir are expected to post a combined profit of $100mn to $150mn in the 2020 year, whereas full-service carriers Air India, Jet Airways Ltd and Vistara will rack up $700mn to $800mn of combined losses, CAPA India said on Tuesday.
"We are very focused on improving our yields and margins," SpiceJet's Singh said. "If fares increase by 10% demand will not be affected, yields will get better and airlines' financial health will be better." Jet Airways, which controls a sixth of India's aviation market and has net debt of $1.13bn, is seeking a financial bailout with money owed to employees, vendors and aircraft lessors.
The airline is in talks with shareholder Etihad Airways and key lender State Bank of India for a rescue deal but for any proposal to be accepted, its founder and chairman Naresh Goyal would need to give up his controlling stake, sources have said.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
US consumer spending rebounds; falling income a threat
Dutch airline KLM to get €3.4bn bailout package
ECB’s Lagarde says ‘probably passed lowest point’ of economic crisis
Business council seeks robust Qatar-Ukraine ties in various sectors
Alibaba replaces CEO of Southeast Asian arm Lazada
Bain to buy Virgin Australia in bold bet on shattered industry
Tencent’s Twitch streaming rival is hiding in plain sight
Samsung heir should not be indicted: Panel
Australia’s $37bn fund targets more private debt for yield