The onus of sustaining the profitability of airlines in India is on IndiGo, as it is up to the largest player to raise the fares to a sustainable level
The onus of sustaining the profitability of airlines in India is on IndiGo, as it is up to the largest player to raise the fares to a sustainable level, Ajay Singh, Chairman and MD of budget carrier Spicejet, said on Wednesday. “Others will follow,” Ajay Singh said at a press meet. “We have an extremely strong player. A lot of the fares are then driven by that player,” Ajay Singh said. “If the leader starts to follow the 5% player, then the market will invert,” he added. Airfares must rise in line with high costs. “We need to increase fares; fares need to be rationalised. We operate in a high-cost environment,” he said explaining the need to increase fares.
Airlines in India have long rued the high cost operating environment and high fuel prices. Both IndiGo and Spicejet reported huge losses in the fiscal second quarter. Ajay Singh also expressed concerns that the “largest airline” will monopolise the aviation sector. Drawing parallels between the Indian aviation sector and telecom industry, he said that there are lessons to be learnt from what became of the telecom sector.
Lessons to be learnt from telecom
“We must make sure that aviation space is not going to go the way that telecom has gone. In aviation as in telecom, there is a large, monopolistic player,” Ajay Singh told reporters at the event. IndiGo is currently the biggest player in domestic Indian aviation with almost one in every two passengers flown by the Rakesh Gangwal- and Rahul Bhatia-founded airline. According to the latest data by aviation watchdog DGCA, IndiGo has close over 47% market share while Ajay Singh’s Spicejet trails at over 16%.
Upon being asked if Indian aviation industry’s single-digit growth so far this year is a result of low capacity addition, Ajay Singh said that “It is pretty incredible that the Indian aviation still be growing after the failure of Jet Airways. When such a large airline goes out of market, you would expect that the market will contract. Indian market has absorbed the reduction of Jet Airways,” he told Financial Express Online. He added that Spicejet remains bullish on Indian aviation’s growth narrative.