Airlines may report losses in Q2

Written by Shaheen Mansuri | Mumbai, Oct 19 | Updated: Oct 20 2007, 06:45am hrs
Stiff competition and high costs of aviation turbine fuel (ATF) will have a negative impact this quarter on the airline industry, opine industry analysts. Says Amar Kedia of ICICI Securities, Though the rupee has firmed up against the dollar, it will hardly have any impact on the company's bottomline. He expects this quarter to be the worst ever for all airlines.

Giving various reasons on why he feels that airlines will not fare good this quarter, Kedia explains, Heavy discounting on tickets in the past three months and unprecedented capacity expansion in the domestic market will send the financials of most of the airlines into a tizzy. He said fuel costs were also at $90 per barrel instead of $80. This, coupled with congestion related delay at busy airports like Mumbai and Delhi, will add to the woes of the operators.

Jet Airways posted losses to the tune of Rs 55 crore in the quarter ended September 30, 2006 due to high operating costs. This quarter, the losses could be much higher than last year for the airline, since its international routes have not stabilized as yet, he said, adding the airline is already reeling under margin pressure due to an increase in the operating costs which it has not been successful in passing on to passengers.

Surabhi Chawla of Angel Broking also forecasts a disappointing result for this quarter. For Air Deccan too, the quarter does not seem that satisfactory. Last year, Air Deccan posted a loss of Rs 42.94 crore for the first quarter (the airlines FY is July to June). With discounts on most of its flights during the quarter and the airline already reeling under heavy losses, it is unlikely for Deccan to post profitable results, said Chawla.

Kedia adds that even for budget carrier SpiceJet, the quarter looks gloomy. It is also in a fleet expansion mode like others, In a situation where costs are rising faster then revenues, turning profitable is a daunting task. SpiceJet too posted losses in the previous quarter at Rs 41 crore.