Turbulent times

Jet Airways + Jet Lite29.8 Indigo7.6 Air India + Indian Airlines19 SpiceJet8.8 Kingfisher + Deccan29.3 Go Air4.2 Others1.3 Source: DGCA  The LCCs, which have about 45 per cent of the market in the country, were expected to garner 60 per cent in the next three years, but with the consolidation (Jet Airways-Sahara, Kingfisher-Deccan and Indian Airlines-Air India) this looks unlikely.  Ernst and Young believes that for the sector to survive, there has to be a rationalisation of ATF prices, consolidation offering synergies in operations and distribution, and improvement in airport infrastructure, which will bring down holding times on the ground and in the air.  In addition, Arora believes that companies with deep pockets, ability and patience to withstand this bad patch and good quality management will survive. And, who are these players?  Analysts say that if crude stabilises at current levels, none of the airlines will make money. However, if crude prices falls below $100 levels, Jet Airways and SpiceJet are the best placed to turn corner. (See: Turbulent future)  While Jet Airways has a robust business model with a good mix of domestic and international routes combined with a value-based carrier Jet Lite, SpiceJet is the lowest cost carrier in the industry currently.  Even for companies which are running a tight operation it is difficult to fathom how they will fund their operations considering that the sector witnessed losses of $1 billion in the last fiscal and lenders are sitting tight. Without additional funds, the outlook for the sector looks rather bleak.  Says Nikhil Vora, managing director, IDFC-SSKI, "Future prospects for the companies look dim. What can be more stark than a sector with a market capitalisation of $3 billion sitting on losses of about $1.5 billion."