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Domestic airlines hit more air pockets

— FILE PHOTO

GEARING UP: Passengers queueing up to board the international flight of a domestic carrier at Calicut airport.

Come September, the tourist and festival seasons set in. Travel and holidaying may be the flavour of the times. The airlines know this only too well and seem to be gearing themselves up for the occasion. But the take off may be costlier for the air travellers this time. Most airlines (both domestic and international) concede they are likely to put up their fares in a week or two. That does not mean they are giving up on the competitive offers. Two major considerations appe ar to have weighed on the airlines: (1) They are sinking more into the red this fiscal and (2) Occupancy will increase this season and they must cash in on it by the time the season peaks from October to January.

A random check with the domestic airlines shows that a 10-20 per cent increase in basic fares may be announced soon. The airlines wait anxiously for a “relief package” promised by the Union Civil Aviation Minister. A core inter-ministerial group is supposed to be working on this package and the airlines hope something tangible may come out of it before long. The expectations centre on concession in the taxes on aviation turbine fuel (ATF), reduction in the taxes on the purchase of aircraft, and some incentives to enable the aviation industry as a whole come out of the lengthening shadows of losses. According to one estimate, the airlines in India alone could sustain losses this financial year of up to $1.5 billion.

Airline managers explain that over the past four years, the cost of ATF has doubled. Fuel alone accounts for 35-40 per cent of the cost of running an airline. Unfortunately, they have not been able to put up fares because of the competitive environment and the need to shore up occupancy. Most established airlines have signed up massive aircraft acquisition deals that stretch till 2011 as of now, with options to buy more in future. Operation costs have risen, the salaries are inching up, but the fares moved down till now. The presence of the low-cost no-frills airlines has added to the complexities because all airlines seem to be fighting for the same destinations, but may be different market segments.

As a Commercial Manager of a private airline puts it: "We have tried our best to cut costs. A series of economy measures, especially on fuel consumption, has been launched. We carry less fuel, cut down on excessive weight in our own equipment and appurtenances, advice passengers to travel light, and coach our pilots to adopt fuel saving techniques. Simultaneously, our corporate clients have also embarked on cost cutting. They are advising their executives to cut down on travel, opt for overnight trains instead of early morning flights. And the opening of the greenfield airports in Bangalore and Hyderabad may have also come at an inopportune time.

Many airlines have drastically pruned their services to Bangalore, and trimmed their operations to Hyderabad. The time taken to travel to and from these airports makes a difference. Now Hyderabad’s Rajiv Gandhi International Airport has already introduced a user charge for domestic passengers, while Bangalore will also follow suit. All this adds up to the fare." That does not mean an end to fare wars or cheap fares. Some of the low-cost airlines have planned a special offer fare ranging from one rupee to Rs. 100 for September-October, to maintain a minimum passenger load level. Regular airlines continue to provide the concessions through apex fares and early bookings, as also on non-peak hour flights. Most often, the taxes add up to more than the fare, even on regular airline tickets. Nevertheless, the fares for flights to Delhi from the southern centres have dipped from around Rs. 10,000 to Rs. 5,000 now. These will go up again.

Deccan Airlines becomes eligible to launch its international operations. But it will be the merged Kingfisher that will be flying abroad. Its inaugural flight will be from Bangalore, its hometown, to London, this week. For its part, Jet is looking to consolidate and expand its operations overseas as it readies to receive more aircraft in 2009 and 2010. In addition to Brussels, it may look around for another hub in Europe to make its operations meaningful.

Air India appears to be in a fix with its mounting losses. The public sector airline, after the merger, has only sustained more losses. It is looking to the Government for a Rs. 2,000-crore relief package both in terms of equity and grant/loan to enable the airline to remain afloat and go ahead with its planned fleet augmentation and replacement programme.

Consequently, the airline industry appears more into the red as it prepares for the peak season. It still awaits some incentives from the government to tide over this crisis.

While all airlines are intent on cutting corners, making domestic travel cheaper, they may be pitching for the premium segment in international operations.

V. JAYANTH

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