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Visible Signs Of Acche Din For Indian Carriers

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Drop in fuel prices and a spurt in passenger traffic have managed to ease the squeeze on Indian airlines this year as evident from the financial results of the BSE-listed carriers. After low-cost airline SpeiceJet posted profits for the first quarter ended June 30, 2015 (and the quarter before that), full service carrier Jet Airways too announced profit of Rs 226 crore for April-June quarter. Jet Airways had posted a net loss of Rs 258 crore in the comparable quarter last year. The airlines attributed its profit to rise in passenger traffic and drop in fuel prices.
 
Jet Airways' strong quarterly show came on the back of higher revenues and increase in passenger traffic, which pushed its revenue up over 10 per cent to Rs 5,658 crore. In the year-ago period, the same stood at Rs 5,097 crore. Passenger revenues climbed 10.4 per cent to Rs 4,707 crore in the latest June quarter. It carried 6.29 million passengers in the quarter as against 5.19 million a year ago, the company said.
 
The Naresh Goyal-led airline said the increased code-share between its partner Etihad helped the airline push down its losses by half in the last fiscal and reiterated optimism that by 2017 the airline could be fully profitable.
 
Jet Airways, which is implementing a three-year turnaround plan, had last reported a net profit in the third quarter of last fiscal, after being in the red in the past seven successive quarters.
 
According to Jet Airways chief executive Cramel Ball, the airline will be reducing losses in 2015, consolidating in 2016 and breaking even in 2017.
 
But analysts point to the continued ticket price wars between the airlines may not be able to sustain the profits for the July-September quarter. “The ticket prices are too low. There is a fare war going on every quarter. The newer players continue to offer schemes which others have to match or better. This will have an impact on the bottom line. Drop in fuel prices can’t be the centre of claiming profitability every quarter,” said an expert who tracks the sector.
 
Similarly, on July 28 SpiceJet had posted its second straight quarterly profit at Rs 71.8 crore in the three months ended June that was helped by a steep 42 per cent reduction in costs and higher seat occupancy. The Gurgaon-headquartered SpiceJet was on the verge of closure late last year. It had posted a net loss of Rs 124.1 crore in the April-June quarter in 2014.
 
While both SpiceJet and Jet Airways are listed on the Bombay Stock Exchange, national carrier Air India is also reported to be heading towards posting a small profit at the end of current financial year. However, the accumulated losses on Air India continue to be close to Rs 40,000 crore. And based on the DRHP filings, Indigo Airlines has been posting profits since the financial year 2009-10.
 
Overall, are the Acche Din here for the aviation sector? The answer is yes, according to several analysts and market reports. What gives the hope to the sector is a consistent growth in domestic passenger traffic, stability in aviation turbine fuel prices, foreign airlines interest in Indian aviation sector, expectations from the new civil aviation policy and rapid development of airports infrastructure across India among others.
 
According to the international aviation body IATA India's domestic passenger traffic increased by 16.3 percent in June 2015 over June 2014.
 
"We are hoping for the imminent announcement of its (India's) new aviation policy. Improved air connectivity would make a major contribution to the government's efforts to make it easier to do business in India," Tony Tyler, director general and chief executive of IATA was quoted in a statement. "For that, we need a policy framework that reduces onerous taxes and regulation and that continues to improve infrastructure and cost efficiency," he said.
 
The data furnished by the civil aviation ministry showed that domestic air passenger traffic increased by 16 per cent in June at 66.01 lakh passengers -- up from 56.89 lakh in the corresponding month last year.
 
The data also showed that low-cost carrier IndiGo achieved the highest market share at 38.4 per cent followed by Jet Airways (18.7), Air India (15.8), SpiceJet (11.6), GoAir (8.7) and JetLite (3.2). AirAsia India and Vistara reported a market share of 1.4 per cent and 1.3 per cent respectively, followed by Air Costa's (1.00) and Air Pegasus (0.1).
 
In terms of overseas interest in Indian carriers, five days ago Qatar Airways had said that it was in talks with IndiGo about taking a stake in India's biggest airline that would expand the Gulf carrier's foothold in one of the world's fastest growing aviation markets."Qatar Airways confirms that the only airline it is talking to is the Indian carrier Indigo," Qatar said in a statement in which it rejected reports that it was interested in acquiring a stake in rival Indian low-cost carrier SpiceJet.


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