Global carriers have flocked to India, lured by a domestic travel boom and what\u2019s expected to be the world\u2019s third-biggest aviation market by 2025. Yet India has proven an intensely competitive market, where profits are scarce and the life expectancy of weaker airlines is anything but certain.<\/p>\n
Jet Airways India Ltd., one of the first carriers to launch after the market opened up in the early 1990s, said in a filing this month that it needs cash to meet liquidity requirements. Its stock price is in a free-fall and the company\u2019s board, which deferred announcing earnings by more than two weeks, is due to meet Monday to discuss austerity measures and a turnaround plan.<\/p>\n
It\u2019s the latest sign of financial distress in a market beset by a crushing fare war that\u2019s made life difficult for foreign carriers, ranging from Malaysia\u2019s low-cost AirAsia Group Bhd. to Singapore Airlines Ltd., not to mention a teeming field of domestic players. The competition is set to intensify if Qatar Airways follows through with its proposal to start a short-haul airline in the country.<\/p>\n
The Indian commercial aviation industry has pretty much been in shakeout mode ever since the government ended a state monopoly enjoyed by Indian Airlines in 1994. Debt-burdened Kingfisher Airlines ended operations in 2012–and 10 other domestic carriers remain locked in a largely profitless struggle for passengers, despite operating in the world\u2019s fastest-growing market.<\/p>\n
Indian carriers pay the world\u2019s highest jet-fuel prices, thanks to local taxes of as much as 30 percent. But the real killer has been a protracted fare war that\u2019s driven ticket prices so low that they can hardly cover costs.<\/p>\n
\u201cIt\u2019s a buyers\u2019 market at the moment,\u201d says Conrad Clifford, vice president for Asia Pacific at the International Air Transport Association. \u201cWhile India has experienced 46 consecutive months of double-digit (passenger) growth, it is still a challenging market for airlines to operate in.\u201d<\/p>\n
With the entry of budget carriers such as IndiGo and SpiceJet Ltd. since the mid-2000\u2019s, full-service carriers like Jet Airways that have higher overhead costs–for in-flight meals and entertainment–have been forced to offer discounts to passengers looking for a great bargain.<\/p>\n
For instance, in 2015, SpiceJet offered base fares of as low as 2 cents. Average ticket prices for New Delhi to Mumbai, the world\u2019s third-busiest route, fell 15 percent to Rs 3,334 ($48) in July-August from the previous year, according to online travel agent Yatra.com. Fares are down 40 percent from 2014, according to Sanjiv Kapoor, the chief commercial officer of Vistara, Singapore Air\u2019s local venture. That compares with a premium rail service for the same route at 4,075 rupees.<\/p>\n
Such fares are \u201cnot sustainable,\u201d yet there\u2019s \u201cno choice\u201d but to keep offering them, Rahul Bhatia, the billionaire co-founder of InterGlobe Aviation Ltd. that operates IndiGo, told analysts last month after almost all of its quarterly profits were wiped out.<\/p>\n
To Robert Mann, the New York-based head of aviation consultancy R.W. Mann & Co., the Indian market now resembles that of the US three decades ago after the government freed ticket prices from federal controls in 1978, setting off a fare war.<\/p>\n
\u201cBut in India, it has persisted for decades,\u201d says Mann. \u201cA fragmented airline industry competes away any scant, potential profits earned.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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