Mumbai: Jet Airways may have unveiled a $55 million fourth quarter loss, but much worse is set to come, says the Centre for Asia Pacific Aviation (CAPA). It says that the recent 'consolidation' efforts in India have had little impact on industry capacity levels, and that only the high price of oil can force India's airlines to trim their schedules.
CAPA says that to climb out of the present financial hole, capacity levels must fall, but that is only one part of a complex story. Fares too must increase, and/or the state governments deliver on fuel taxation relief.
Jet Airways currently losing $2 million per day
Jet has stated that the next few quarters would be impacted negatively by very high fuel prices. A senior manager revealed in an internal letter to key executives this week that the airline is currently losing $2 million per day, including $1 million as a result of its ambitious international expansion.
According to the letter, the executive stated Jet ''should not shy away'' from cutting services if they do not cover variable costs.
India's airline losses could reach $2 billion this year; losses to force a shakeout
CAPA says that this is instructive of what is occurring across the sector. With contributions to overheads off the agenda and variable costs surging due to rising oil prices, combined industry losses could reach $2 billion in India this year.
Losses of this magnitude will inevitably force a shake-out. Only in this way can India's industry ready itself for the next round of growth.
SpiceJet slashing daily services by 17 per cent next month
SpiceJet is slashing 17 per cent of its daily services next month, and has been the centre of persistent take over speculation.
However, with Jet Airways in a weakened financial position, it is an unlikely buyer, even though SpiceJet and JetLite are a good fit, in terms of network and fleet. Air India is in a far more troubled financial state, and is struggling merely to complete its own integration with Indian Airlines, much less take over another player.
Kingfisher: the likely instigator for change
CAPA says that that leaves Kingfisher, which defied expectations with its takeover of Air Deccan last year, and the smaller players like Paramount, GoAir and Indigo to enact some rationalisation in the market. On recent form, Kingfisher is the likely instigator for change, although it too is experiencing growing pains, says CAPA.