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With recessionary blues slowly abating, domestic
airlines have been making big plans for fleet
and route expansion along with increased hiring
of both pilots and cabin crew. These plans may
now face uncertainty as the 2010-11 budget proposals
envisage an increase in aviation turbine fuel
prices along with the imposing service tax on
all passengers. In other words, air fares are
set to be hiked within the next few days. This
will, in turn, have an impact on the volume of
air passengers and ultimately will affect the
bottomline of airlines.
Till last week, the airline industry appeared
to be looking up after the crisis period gone
through in the latter half of 2008 when large
scale retrenchments had created a hue and cry
in the country. The scale of revival is indicated
by official traffic data released recently showing
that domestic passenger traffic increased by as
much as 23 per cent in January this year compared
to the same period last year. Jet Airways and
its subsidiary Jet Lite had the highest number
of passengers at 1.28 million but among the budget
airlines, IndiGo was the leader with 6,25,000
passengers. The Jet Airways – Jet Lite group now
has 25.4 per cent of the market followed by Kingfisher
at 22.2 per and Air India at 18 per cent.
The no frills airlines continue to do well and
their combined market share is a substantial 34.7
per cent. In fact, these airlines have been looking
to go on a hiring spree to their expanding fleet’s
requirements. IndiGo, for instance, is reported
to be considering hiring as many as 1000 personnel
including 100 pilots, 400 cabin crew and other
passenger service staff. Its fleet of 24 aircraft
is set to rise to 34 by the end of the year.
Similarly, Spicejet’s fleet will also go up from
19 to 25 and needs staff for its new inductions.
The concerns about profitability of larger carriers
like Air India and Kingfisher, however, remain
as their bottomlines are under threat.
Air India is having to bear the burden of enormous
losses that would have pushed any private airline
to close down but governmental support is propping
up this behemoth. This artificial respiration,
however, cannot continue for all time. The airline
has always suffered from an excess of bloated
staff, and is now also burdened with new aircraft
acquisitions that in any case are required.
As for Kingfisher, it is clear that owner Vijay
Mallya has overstretched himself by going ahead
with huge investments for fleet expansion along
with launching international routes that are not
fetching much revenue for the time being.
Anyway, the fate of the industry needs to be
reviewed a few months down the line when the impact
of the budget is likely to take effect. Till then
one can only hope that the revival of the airline
industry’s fortunes continue to keep the domestic
airlines flying high.
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