Experts predict good times ahead for private airlines

Comments 0
SummaryLosses returned to haunt private sector airlines in the second quarter of the 2012 fiscal, but the strategy of disciplined pricing of fares could see a return to profit in the next half of the fiscal, say industry observers.

Peak season, focus on yields to spur growth in second half of FY13; Kingfisher not included in forecast of CAPA report

Losses returned to haunt private sector airlines in the second quarter of the 2012 fiscal, but the strategy of disciplined pricing of fares could see a return to profit in the next half of the fiscal, say industry observers.

During the quarter, the three listed airlines — Jet Airways, SpiceJet and Kingfisher Airlines — posted a combined loss of R1,017.19 crore, as Kingfisher’s loss alone spiralled 61% to R754 crore.

However, the focus on yields and improving passenger traffic trends in the ongoing peak season has led the Centre for Asia Pacific Aviation (CAPA) to estimate that the airline industry (excluding Air India and Kingfisher) will post profit of $120-140 million (R660-700 crore) for the third quarter.

CAPA’s estimates are based on Brent crude oil prices averaging around $110/barrel and exchange rate of R52-54 to the dollar.

“With the onset of the peak season in October, we expect the near-term demand and yield outlook for the industry to be decent,” said Rajani Khetan, an analyst with HSBC Global Research. “Although, fuel prices remain uncomfortably high, we have seen some softening.”

“Airlines maintained pricing discipline and were prepared to sacrifice load factors rather than compromise yields, which were higher than the corresponding period last year,” said CAPA in a note released on October 24.

“The airlines are hoping for a robust second half of the year,” the note added. “The month of October has not lived up to expectations, with most carriers breaking-even and some posting modest losses, however, November and December look encouraging with strong yields and load factors.”

Analysts expect pricing power to only improve in the next two quarters.

“We expect pricing power to remain with the carriers over the next 12 months,” said Anand Kumar, an analyst with foreign brokerage firm Bank of America Merill Lynch in a research note published on November 15.

“This is largely on the back of restricted capacity growth and a traffic recovery in the latter half.”

“Capacity for Q3 is expected

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...