2014: A mixed year for Indian aviation
Manu Kaushik December 31, 2014
India's aviation sector has had a rollercoaster ride in the year gone by with two new airlines (AirAsia and Vistara) being launched and low-cost carrier SpiceJet coming close to a shutdown.
Malaysian no-frills carrier AirAsia announced its partnership with Tata Group early last year but it took its first flight in June this year.
The carrier is operating two Airbus A320s and will ramp up its fleet significantly in the next few months. Initially, the airline decided to shun Delhi and Mumbai for their high airport charges. However, the airline will be shortly flying from Delhi.
Vistara, a tie-up between Tata Group and Singapore Airlines, made its launch announcement in August this year. The airline was supposed to launch in October but its plans got postponed due to delay in getting flying permit from the Directorate General of Civil Aviation (DGCA). Both AirAsia and Vistara will be targeting different set of customers.
AirAsia, with its low fares, is competing with IndiGo, Go Air and SpiceJet. Vistara, on the other hand, will be competing with Jet Airways, which is shifting its focus on business class after Etihad bought a 26 per cent stake in the Indian carrier late last year.
Air India's partnership with Star Alliance came as good news for frequent flyers in the country.
Star Alliance has 27 airlines as members across the globe. Air India passengers benefit from the rewards programmes of Star Alliance members and the alliance gives them access to various airport lounges and other perks.
SpiceJet, which nearly faced a closure, saw its co-founder Ajay Singh giving it a fresh lease of life. While Singh still has to make his investments, it is believed that he, along with two global private equity investors, will be pumping in some Rs 1,200 crore to pay off the airline's dues.
SpiceJet had been looking for investors since early this year to infuse fresh money into the ailing carrier. It was only in mid-December when things got out of hands that Singh decided to intervene.
Amidst the high-decibel launches, the existing players witnessed improvement in passenger traffic, higher passenger load factors and a sharp drop in fuel prices.
Passengers carried by domestic airlines in the 11 months till November stood at 6.09 crore, 9.14 per cent higher than the corresponding figure (5.58 crore) for last year.
The price of aviation turbine fuel (ATF), which accounts for over 40 per cent of airlines' operating costs, have gone down by over 15 per cent in the past one year. The low ATF prices coupled with a stable rupee are expected to give a breather to airlines in the near future.
The future looks rosy for the aviation sector.
A Crisil report says that the next financial year (2015/16) will be much better for the aviation sector. "Domestic air traffic growth is expected to soar to double digits by 2015/16, helped by economic recovery, relatively smaller price hikes and enhanced connectivity.
At an aggregate level, domestic carriers are expected to post an operating profit of Rs 8,100 crore in 2015/16, a complete U-turn from the Rs 1,500 crore loss in 2013/14," the report says.
While it is not apt to say that the Indian aviation sector is maturing - on average, an airline goes belly up every two years - but the recent developments indicate that global investors still have faith in the potential of the sector.