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Indian aviation forecast to slash losses, with ticket prices rising

High fuel prices, a weak rupee and intense competition dragged down airline financial results for much of 2018.

Reuters  |  NEW DELHI 

Aviation turbine fuel price had risen 60 per cent since mid-2016, adding to the airlines' woes.
Aviation turbine fuel price had risen 60 per cent since mid-2016, adding to the airlines’ woes.

India's are poised to cut their cumulative losses by as much as two-thirds in the financial year starting in April, aviation consultancy said on Tuesday, with executives saying ticket prices are finally rising.

The consultancy's forecast is for Indian carriers to lose a collective $550 million to $700 million for financial year 2020, including a return to profit by low-cost carriers, against an estimated $1.7 billion loss for the 2019 year ending in March.

The latter figure is an improvement to CAPA India's last forecast for losses of up to $1.9 billion issued in September when prices were higher.

"The opportunity exists to create a sustainable, profitable future within 1-2 years," said as the forecast was released at its annual conference in New Delhi. "This will drive serious investor interest given the size of the market."

A narrowing of losses will ease the pressure on Indian carriers in financing the hundreds of SE and jets they have on order. They are tapping rising demand from a growing middle class in the world's fastest-growing major domestic aviation market and expanding operations internationally.

Domestic air traffic is forecast to rise by 14 to 16 percent in financial year 2020, said, with international traffic set to be 10 to 12 percent higher as the Indian fleet expands by more than 90 aircraft.

"We plan to expand international aggressively," Ltd and Managing Director told reporters on the sidelines of the conference. "It is time to start looking at narrowbodies for medium and long haul. The (Boeing 737) MAX allows us to do that."

Cut-throat competition has made India one of the world's markets with deals such as $50 one-way tickets on the two-hour flight from to Delhi. High fuel prices, a weak rupee and intense competition dragged down financial results for much of 2018.

But fares are on the rise with low-cost carriers and reporting higher yields and swinging to net profits in the quarter ended Dec. 31 after losses earlier in the financial year.

Chief Strategy and Commercial Officer said his airline had seen a significant improvement in pricing as discipline returned to the market.

"If remains below $65 dollars a barrel the industry has a chance of recovery," he said. "Last year was not easy."

Budget carriers, which include IndiGo, SpiceJet, India and are expected to post a combined profit of $100 million to $150 million in the 2020 year, whereas full-service carriers Air India, and will rack up $700 million to $800 million of combined losses, CAPA India said on Tuesday.

"We are very focused on improving our yields and margins," SpiceJet's Singh said. "If fares increase by 10 percent demand will not be affected, yields will get better and airlines' financial health will be better."

Jet Airways, which controls a sixth of India's aviation market and has net debt of $1.13 billion, is seeking a financial bailout with money owed to employees, vendors and aircraft lessors.

The airline is in talks with shareholder and key lender for a rescue deal but for any proposal to be accepted, its founder and would need to give up his controlling stake, sources have said.



(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, February 12 2019. 15:07 IST