Open doors for Indian airspace?

India’s reputation as a bastion of protectionism may have softened in recent decades, but when it comes to aviation, the country still has a reputation for protectionism. Alarmed by the rise of the Gulf carriers, India has stood foursquare behind its airlines, setting caps on the extent to which Gulf airlines can avail themselves of traffic from the sub-continent.

But no investigation of competition between airlines in the Gulf and India fighting for the same traffic can begin without looking at the truly parlous state of domestic aviation in India today. Research by the CAPA Centre for Aviation shows that huge losses are continuing and the situation looks unlikely to improve quickly.
India’s airlines lost a staggering $1.65 billion in the last financial year, an improvement at least on the $2.2 billion lost from 2011 to 2012.

In addition, Indian airlines are said to have severe debt levels which are likely to prove burdensome if not resolved soon. “India’s airlines have an estimated combined debt of approximately $14.5 billion (with additional vendor-related liabilities of around $2 billion), compared with an average cash position of just $500–550 million,” the CAPA report said.

“Aggressive discounting during the traditionally weak period between January and March resulted in losses of $700 million during this quarter alone (close to $500 million if Kingfisher is excluded),” CAPA said, commenting on the Indian airlines’ FY2013 performance.

In the international space, for the first time last year, Emirates became the biggest player by market share in traffic to and from India, with just over 12 per cent of the highly fragmented market. IndiGo, today India’s most successful air carrier, as a domestic-only player does not figure in this metric.

Read the full report here, Gulf Business


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