Thursday April 15, 2010

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By Sam Devraj  ( Assistant Editor )

Return of the travellers: Passenger traffic grew 20.54 per cent in January-March

INDIA’S aviation industry, which is expected to lose $2.1bn (£1.36bn) in 2009/10, is cautiously expanding routes and adding capacity as an economic recovery sets in, but fund raising continues to pose a challenge. “Return to growth was sharper than we expected because of impressive economic growth and significant capacity reduction by airlines, especially Jet and Kingfisher,” said Kapil Kaul, chief executive Indian subcontinent and Middle East, Centre for Asia Pacific Aviation (CAPA), an aviation consulting firm. In the last two years, the airlines sector in India and globally had been battered by a spike in fuel prices and economic slowdown resulting in lower travel spends. The past few months though have thrown up evidence of a turnaround with travellers returning and passenger traffic grew 20.54 per cent in Jan-March over a year ago, government data showed. All private carriers posted seat factors of over 72 per cent in Feb-March, while three budget airlines - SpiceJet, Indigo and Paramount - recorded over 75 per cent. Jet Airways, India’s top private carrier by sales, reported around 80 per cent load factor for international routes. ‘We are happy with the bookings we have received for April to June. Volume driven yields will go up,” said Raj Sivakumar, vice president, revenue management, Jet Airways. The new-found confidence is prompting airlines to reach out to newer overseas locations though the pace of expansion is more measured now than what was seen in 2008, before the slowdown hit. While Jet has launched a daily Mumbai-Johannesburg flight, Kingfisher has received approval for seven new international routes and budget carrier SpiceJet is getting ready to make its international debut.

The airlines are also adding seats and planes to service new routes after having slashed capacity by 15 per cent during the slowdown, analysts said. CAPA estimates the domestic aviation industry to add 7-8 per cent capacity in a year, but expects a capacity crunch in the third quarter this year. Kingfisher Airlines chairman Vijay Mallya said the firm may look at inducting new aircraft sooner than planned to capitalise on the upturn. Ravi Nedungadi, chief financial officer of the UB group, which has a controlling stake in Kingfisher, said the carrier would become profitable from fiscal year 2012.

But airlines’ plans to raise funds and de-leverage their balance sheet has hit an air pocket as both Jet and Kingfisher have delayed their fund raising plan through share sale and a rights and GDR issue respectively to the current fiscal. “A persistent problem is that domestic investors are reluctant to invest in this industry as it’s a risky industry,” said an aviation analyst from a local brokerage.

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