Despite expectations of financial improvements for some domestic carriers in the three months ended December, civil aviation executives and experts are wondering if the industry has flown past cloudy weather.
With all its festivals and holidays, the December quarter forms the peak travelling season—and that is expected to reflect in the account books of a number of airlines affected by the aviation downturn of the past year and a half. But worries over volatile jet fuel costs and price competition have dampened some of the exuberance.
On Thursday, Kingfisher Airlines Ltd kicked off the earnings season with an operating profit of Rs11 crore for its domestic operations, although it posted a net loss of Rs419.96 crore.
SpiceJet Ltd posted a record profit of Rs108.9 crore for the same quarter. Jet Airways (India) Ltd, which will announce its results on Monday, is expected to post a profit of around Rs10 crore.
While analysts who track the industry are upbeat, airline executives remain cautiously optimistic. Some are downright sceptical about whether the numbers are an indication of better times to come. They warn that even minor changes in the business environment could scuttle any hopes of recovery.
“The airline sector is exhibiting strong recovery, with an increase in passenger traffic and bottoming of yields. This, along with stable oil prices, is expected to lead to (the) sector turning profitable by next year,” wrote S. Arun, senior director at global brokerage DSP Merril Lynch, in a report on 5 October. This was a turnaround from his earlier position.
A December report from Nikhil Vora and Shweta Dewan, senior analysts at domestic brokerage IDFC-SSKI Securities Ltd, said that “the worst for aviation is clearly over”.
On 18 January, they wrote, “Indian aviation, too, is set to take off with domestic segment reporting peak passenger traffic.”
India is the ninth largest aviation market in the world, and fourth in terms of domestic passengers volume. The Directorate General of Civil Aviation (DGCA), India’s airline regulator, said on 13 January the domestic market expanded 7.5% in 2009 from 2008.
Nearly 3.07 million additional passengers took to the skies in 2009, taking the total number of fliers to 43.84 million, up from 40.77 million in 2008 and 42.85 million in 2007. December 2009 alone recorded 4.48 million fliers, a 35.02% increase over the 3.32 million in December 2008.
But doubters remain.
It is not real growth, said Charles Dhanaraj, associate professor of management at the Kelley School of Business at Indiana University, Indianapolis, an expert on the Indian aviation industry.
Source: Mint
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