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$25 Lost on Every Passenger Flown : Airlines
By siliconindia
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Friday, 23 December 2011, 01:43 IST |
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1, 300. Consulting firm Centre for Asia Pacific Aviation estimates that the airlines are set to post a record loss of $2.5 billion this fiscal year. The airfare between Delhi and Mumbai is about $126, the lowest economy airfare till now.
Around 52 million passengers travelled through airplanes for the year 2010-11 this year and the traffic is growing into double digits. As quoted by livemint.com, Kapil Kaul, Capa's South Asia CEO said, "This is the worst-performing year for the sector. These are record losses in the history of Indian aviation. Such losses have never been there even in FY08 when the fuel went up to $150 and operating environment was hard." Capa estimates that the $2.5 billion loss would be on total projected revenue of $10 billion.
State-run airlines like Air India, Jet Airways (India), Kingfisher Airlines, SpiceJet, InterGlobe Aviation run IndiGo, and GoAir. Most of the revenue for Air India and IndiGo is generated from international operations. Whereas, the majority of revenue is for Kingfisher, Spicejet and IndiGo, which also fly abroad is generated from local operations.
Capa mentioned in its research note, "The paradox of India's airline sector is that it serves one of the world's fastest-growing economies and is posting double-digit traffic growth."
IndiGo will formulate $600 million of the $2.5 billion loss, and Air India will bear the rest. A total of $5-6 billion losses have been accumulated for India's airlines since 2008. Kul said, "One of the things we are seeing is banks is also going to factor an impact on their balance sheets next year."
In April 2009, the Jet's stock was at 170-180 which had a two year low of 176.95 with a downfall of 7.36 percent that results the Sensex to lose 1.33 percent as a whole. Kingfisher was down 1.61 percent at 21.40 and SpiceJet closed at 16.10.
The December report by Mumbai-based Citi Investment Research and Analysis slashes its target price on Jet shares to 172 from 234.90 referring to the worse economic conditions, soaring fuel price and debt among other reasons.
Citi said in the report, "The key concern with the domestic industry is the high degree of fragmentation, which renders it a challenge to raise fares (and yields) in the best of times-in a challenging environment, the impact of high fuel prices/depreciating currency is exacerbated by the carriers' inability to raise fares sufficiently to offset cost pressures."
Kaul commented on dowfall in Jet's stock as "likely because of the money they may have to pay for EU carbon emissions tax." Record losses have been produced by airlines in 2008-09 as oil prices touching $150 a barrel. 2012 looks out to be tough, though the price stabilized this year at about $100.
So far, Kaul said no airline will put down the lid. "The appetite for losing money is the highest in India" among airline owners, he said. "We expect a very, very tough 2012."