Fare wars land airlines in a mess

For a moment, it seemed as if the aviation business was about to turn the corner: losses would be wiped out, and the sector would live happily ever after. Passenger traffic grew almost 14 per cent in the quarter ended September 30 as compared to the year-ago quarter. Two low-cost carriers, IndiGo and GoAir, reported strong numbers. GoAir reported its maiden profit of Rs 104.34 crore in 2012-13 as against a loss of Rs 133.72 crore in the previous year. The company clarified that the profit was due to the changes in accounting policies with respect to aircraft lease rentals (or else, it would have made a loss of Rs 79.28 crore), yet the euphoria was unmistakable. IndiGo announced that its (gross) profit had risen to Rs 993 crore in 2012-13, compared to Rs 64 crore in the previous financial year. Even debt-laden state-owned Air India was said to be on the path to recovery, having slashed its workforce, inducted fuel-efficient Dreamliners into its fleet and embarked on its ambitious asset-monetisation drive.

The party was spoiled somewhat when Jet Airways announced a staggering consolidated loss of Rs 998 crore for the quarter ended September 30. It was its third straight quarter in the red. The loss was six times higher than Rs 165 crore in the corresponding period last year and 28 per cent more than Rs 778 crore in the whole of 2012-13. Then SpiceJet announced a loss of Rs 559 crore in the September-ended quarter, three-and-a-half times the loss in the same quarter of 2012-13. According to the Centre for Asia-Pacific Aviation, or CAPA, which analyses the aviation market in the region, all Indian carriers put together, including IndiGo, lost over $500 million in the September-ended quarter.

Full report here Business Standard


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