Mumbai: India’s airlines, which registered a consolidated profit in 2015-16 for the first time in a decade, are likely to slip back into red for the full year that ends in March 2017, and the losses may widen further next fiscal due to excess capacity and rising fuel prices, consultancy CAPA India said in a report. The report was released at CAPA India’s two-day aviation summit which began in Mumbai on Wednesday.
Airline CEOs who attended the meet conceded yields are under pressure owing to excess capacity.
Newer entrants like Vistara also rued about the increasing congestion and scarce slots at airports like Mumbai.
Pankaj Srivasatava, director commercial at Air India said the firm has seen pressure on yield on account of excess capacity. Amit Agarwal, acting chief executive officer (CEO) and chief financial officer at Jet Airways, said a healthy mix of corporate flyers has helped, but yields are under pressure.
Indian airlines have 880 air planes on order of which 600 to 650 are expected to be delivered over the next decade.
CAPA estimates that India’s airlines reported a combined profit of $122 million in fiscal 2016, the first time in a decade. However, this may be short-lived. Traffic growth, it pointed out, is being stimulated above its actual demand due to excess capacity and competitive fares.
“The downward pressure on yields, combined with cost creep, is expected to push consolidated industry result back in the red for the twelve months that end in March 2017.”
While airlines like Jet Airways and IndiGo will see their annual profit contract in fiscal 2017, Air India Ltd, Air Asia India and Vistara will see the losses widening from the year-ago period, CAPA said.
CAPA expects losses at consolidated level for the industry to rise further to $380-450 million in fiscal 2018.
The consulting firm also warned that India faces a real prospect of an airport crisis. Delays in developing a long-term airport plan could jeopardize economic growth, it said.
With the majority of flights still originating from Delhi, Mumbai, Chennai, Bengaluru and Kolkata, airports at these metros are running to capacity. As a result, they have limited the number of slots for each airline or stopped allotting fresh slots altogether.
Mumbai International Airport Ltd, which sees 48-52 flights take off or land on a single runway every hour, has stopped giving new slots.
In order to beat congestion, airlines have been inducting wide-body planes even for domestic market. Rajeev Jain, CEO of GVK Mumbai International Airport Ltd, said the airport is incentivizing firms with bigger planes by reducing landing charges. “though its still higher than narrow planes, the gap has reduced”.