There seems to be no imminent sign of relief on the cost front for Indian carriers, who are expected to post losses, recorded during the recently concluded quarter and the financial year, on the back of high fuel costs and airport taxes. ?
With the financial performance of Indian domestic carriers characterized by weak second and fourth quarters historically, mostly due to lower traffic, aggressive discounting of fares during the March quarter has further pushed airlines into the red.
Full year profitability requires carriers to recoup these losses in the first and third quarters, said Centre for Asia Pacific Aviation (CAPA) in a recent research report.
However, with airlines reporting losses even during the peak season, all but two in the sector are now expected to post losses for FY 2014. ?
?When the industry is reporting significant losses in peak season it is clear that the domestic Indian aviation market has a fundamental problem with viability,? the CAPA report added.
According to the aviation information consultancy, three carriers ? Air India, Jet Airways and SpiceJet ? are expected to post a combined losses in excess of $1.2 billion during Fy 2014, a figure that could rise higher as a weak outlook for March could trigger further promotional pricing, it added.
This is widely expected as there have been more than 10 different discount schemes laid out by low cost carrier SpiceJet since ?January 2014, which eventually led to price war of sorts with other carriers following the trend.
One of the two airlines, listed on the Bombay Stock Exchange (BSE), SpiceJet recently reported a net loss of Rs 1003.24 crore for the year that ended on March 31, 2014, higher than net loss of Rs 191.07 crore it posted during the previous year. This despite the airlines’ total income from operations rising 11.51% to Rs 6356.10 crore during FY 2014 over the previous year.
The airline reported a net loss of Rs 321.51 crore for Q4, Fy 2014, higher than ?Rs 185.71 crore it posted during the previous year. ?Its total income from operations however rose 8.37% to Rs 1589.61 crore during the March quarter from a year ago.
SpiceJet?s long-term debt to capital ratio is 91%, exceeded in Asia only by state-run Pakistan International Airlines, according to data compiled by Bloomberg. Shares of SpiceJet have slid 49 % in Mumbai trading in the past year, compared with a 19% gain in the S&P BSE Sensex Index.
The other airline listed on the BSE, Jet Airways ? ?the country’s second largest in terms of passengers carried, is also expected to record full year losses for FY 2014. The airline’s ?shares have declined 57 % in the past year, more than those of SpiceJet. Jet hasn?t posted an annual profit in five years, according to data compiled by Bloomberg.
According to Bloomberg estimates, Jet Airways is set to post a net loss of about Rs 150 crore for the March quarter, on the back of sales of Rs 4,864 crore. The airlines is however expected to post an operating profit of Rs 550 crore during the quarter.
The Naresh Goyal-controlled airline is expected to post a loss of Rs 2000 crore for FY 2014, on the back of a Rs 552 crore operating losses and sales worth Rs 19,395 crore. ?
State-run Air India is also expected to post a loss of Rs 3,900 crore, during Fy 2014 down from Rs 5,200 crore it posted during Fy 2013, a senior official of ?Air India had earlier told FE.
IndiGo and GoAir are the only airlines likely to be profitable in FY2014, said another CAPA report. However, Jehangir Wadia-controlled Go Air could also post a moderate loss on the back of decline of the airline’s heavy yields since the beginning of the year, although IndiGo result could fall short of earlier expectations, it added.
?