Everyone will be an LCC and everyone stands to lose: Capa

With the focus of full service carriers like Air India, Jet Airways and Kingfisher Airlines shifting to the low-cost carrier (LCC) model, the “Indian airline earnings outlook looks increasingly challenged”, according to the Centre for Asia Pacific Aviation (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”, 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.