New Delhi: With the focus of full service carriers like Air India, Jet Airways and Kingfisher Airlines shifting to low cost carrier (LCC) model, the "Indian airline earnings outlook looks increasingly challenged", according to aviation consultancy CAPA.
Domestic losses in India are expected to rise in the
second quarter to September 30, 2009, and "the earnings
outlook beyond that is also questionable for full service and
LCC carriers alike," Centre for Asia Pacific Aviation (CAPA)
said in a recent report.
By the third quarter, when all full service airlines
would bring a significant part of their operations under the
low-cost model, yields can be expected to fall even further
while industry over-capacity is still an issue, the
consultancy noted.
"Everyone will "be an LCC" by the third quarter and
everyone stands to lose," it said.
"The problem for the incumbents (full service carriers)
is they are entering the LCC sphere with still-higher cost
structures relative to their peers, while their mainline
operations remain subject to intense competition. The problem
for the LCCs is that everyone is now moving to imitate them,"
CAPA said.
Air India recently announced that its low-cost entity Air
India Express, which only has international operations
currently, will commence domestic flights in the winter
season. It will take away over a quarter of Air India's
domestic flight schedule.
Jet Airways has already shifted almost half of its
flights to its low-cost service brand Jet Konnect and plans to
mount more of its flights onto the brand in October.
Even Kingfisher has brought a huge number of flights
under its low-cost service Kingfisher Red and plans to further
enhance it.
LCCs currently account for about 55 per cent of the
domestic aviation market.
Bureau Report
First Published: Thursday, August 13, 2009, 15:47