Indian airlines eyeing international skies

Profits going strong for global airlines

Aviation

July 17, 2018

/ By / Kolkata



Indian airlines eyeing for international skies

Indian airlines eyeing international skies

The profits of the global airlines have been strong since 2015, with wide regional variations; Indian carriers are struggling to keep their profit constant.

Indian airlines are moving towards the international market in search of better returns as the intensifying fight for a bigger share of the world’s fastest growing domestic market drives down profits, says a recent report by Reuters.

A data report from the travel firm Rome2Rio, says that, India is among the cheapest domestic airlines market in the world, with an average fare of 13 cents per kilometre flown, less than half the 27 cents per km average in China and the United States of America (US). Promotional offers on a two-hour flight from Mumbai to Delhi, such as, USD 50 one-way tickets, are easier to find, and for the airlines that are expected to take delivery for more than 500 aircraft in the next five years, the pressure on profits and fares are also increasing. The Indian airlines market is growing by 30 pc.

According to Reuters, since 2015, the profits of the global airlines have been strong, though the variations between regions are wide, therefore the Indian carriers are struggling to keep their profit constant, despite them enjoying almost 90 pc seat reservation in the domestic market and benefitting from a more than double of the domestic passenger numbers over the last four years.

Airlines including SpiceJet Ltd (SPJT.BO), Vistara, InterGlobe Aviation Ltd’s (INGL.NS) IndiGo are conversing so that they can buy or lease the widebody aircraft, and to boost profit they are firming up international growth plans.

“It is an incredibly tough domestic market, very price sensitive. Commanding a premium for a premium product is hard to do. From our perspective we invested in order to see the business grow internationally. If you look at the results of Indian airlines their performance is better internationally,” said Stephen Barnes, chief financial officer of Singapore Airlines, which operates an Indian carrier, Vistara, in a joint venture with the Tata Group.

According to an analysis of household income by aviation consultancy, CAPA, only 0.3 pc of the 1.3 billion population currently travel abroad for a holiday every year, a fraction of the estimated 100 million Indians who could potentially afford to do so.

Jet Airways is planning to launch new flights from Mumbai to Sydney, according to reports, while Vistara is planning to order six Boeing Co (BA.N) 787 aircraft and will expand its narrow body fleet of Airbus (AIR.PA) A320neos as it starts international flights, sources have said. At a time when Air India has been losing market share to rivals, domestic flights are eyeing up to take on its market.

According to IBEF, domestic passenger traffic grew YoY by 18.28 pc to reach 243 million in FY18 and is expected to become 293 million in FY20E. International passenger grew YoY by 10.43 pc to reach 65 million in FY18 and traffic is expected to become 76 million in FY20E. India’s domestic and international aircraft movements grew 14.40 pc YoY and 9.40 pc YoY to 1,886.63 thousand and 437.93 thousand during 2017-18, respectively. Also, domestic freight traffic in FY18 stood at 1,213.06 million tonnes, while international freight traffic was at 2,143.97 million tonnes.

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