Mounting losses likely to fuel more M&As in aviation space

State-run oil firms have hiked jet fuel (aviation turbine fuel) prices by 18.5 per cent in line with rising international crude oil prices.

"There are chances that we will see players exiting by the end of the year. There might be casualties and damage. If the bigger players, like Kingfisher and Jet, get the right price, they might acquire other airlines," Kapil Kaul, CEO, Centre for Asia Pacific Aviation (CAPA) - Indian sub-continent and West Asia, and aviation consultant, said while speaking to Business Standard.

CAPA, which had earlier forecast the losses for the industry at $700 million for the current financial year, is revising the forecast after the fuel costs have spiralled and even crossed $135 per barrel earlier.

The aviation industry has seen mergers of national carriers Indian and Air India, and acquisitions of Air Sahara and Deccan by Jet Airways and Kingfisher, respectively.

Ahead of the possible acquisitions, Kaul said airlines will also look at meaningful partnerships.

"The current crisis in the industry will see airlines coming together and talking of complementing each other. We will see strategic partnerships and dialogues of genuine manner emerging and airlines will have a more rationale approach towards competition."

Also, according to CAPA, issues like high lease rentals for aircraft and the shortage of skilled professionals will now be addressed by the industry since demand in the last four to five years was high. "Now, these issues need careful attention," said Kaul.

There will be a widespread move towards rationalisation in the industry as the escalation in the cost of air turbine fuel have hurt the bottomlines of airlines across the globe and more so in India. The losses will undo the good work done by the government in the long term, CAPA points out.

"We will see all aspects of the airline business, be it commercial or operational, coupled with uncertainty, come into play in the next 12 months," said Kaul.