Current competition in Indian aviation industry not in line with profitability: CAPA

Current competitive dynamics of the Indian aviation industry are not aligned with a profitable structure, market advisory CAPA said Tuesday.

The Centre for Asia Pacific Aviation (CAPA) in its outlook for Indian aviation market for the next fiscal also pointed out that a clear long-term strategy is not visible for some carriers.

The outlook has come at a time when major Indian airlines have reported a sharp drop in their profits.

Budget carrier SpiceJet on Monday reported a massive 77 per cent fall in its net profit at Rs 55 crore owing to higher aviation fuel cost and rupee depreciation.

Last month, InterGlobe Aviation, the parent of IndiGo, reported a 75 per cent fall in profit after tax at Rs 190.9 crore in the December quarter as high fuel prices and currency depreciation adversely impacted the bottomline.

Pilot shortage remains a "structural" issue for airlines and banks are expected to become "more cautious" with Indian airlines, CAPA said in a presentation during the India Aviation Summit 2019 in New Delhi.

The Indian aviation industry is likely to see consolidation "around 4-5 airline groups", it predicted.

CAPA in its presentation said that "strong balance sheets are key for long term viability" and the Indian aviation industry is "likely to see new investors in 2-3 Indian carriers in 2019-20".

It added that induction of new aircraft like Airbus A320neo and Boeing 737Max is delivering a 10 per cent reduction in cost for Indian airline companies.

Moreover, if air turbine fuel is brought under GST, it would deliver "almost an additional 10 per cent reduction" for companies.