Aviation industry yet to get a smooth landing
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The woes of the aviation sector are far from over. With a spate of new carriers lining up to enter the market, the sector, which got a respite recently with the fall in oil prices, is facing overcapacity again with the average seat-load factor of Indian carriers hovering at a low of 62 per cent — much less than the desired 75-80 per cent that would help airlines make money.
While new players like Paramount and East West are getting ready to take off and others like Indigo expanding their operations, the beleaguered aviation market, reeling under the stress of high ATF prices and increasing operational cost is finding out newer ways to stem cash outflows and generate newer revenue streams. The process of putting up a joint front to meet the challenges of the market may have already begun with the proposed meeting of airline CEOs on October 16.
"The primary concern of intense price competition in the industry remains in place. Any benefits accruing from sustained reduction in ATF prices may be neutralised by further increase in price competition. Currently, all players are imposing a fuel surcharge to cover past hikes in ATF prices. Given the competitive scenario, the possibility of this surcharge being removed remains," explains an analyst with Edelweiss Research.
While airlines are united on the issue of not cutting fuel surcharge, observers say the bulk of growth has been due to low prices. It remains to be seen which airline will break the ranks and reduce prices to meet the challenges posed by the spate of newcomers poised to enter the market.
Mounting losses are another problem. "The losses in the Indian aviation industry are a cause for concern and need to be checked. Otherwise it could spell disaster for the industry," said Dinesh A. Keskar, senior vice-president-sales (commercial planes), Boeing.
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