The Indian civil aviation sector continued to suffer from losses in 2014-15 with the airline industry estimated to have borne a loss of over Rs.7,000 crore, despite 35 per cent reduction in jet fuel cost during the year.
Had there been no respite from high jet fuel price, the industry could have sunk in the red. The significant drop in jet fuel prices enabled the industry to minimise its losses as compared to the previous year. Stringent cost cutting measures though helped in reducing losses.
Jet Airways reduced its net loss to Rs.2,097 crore from a net loss of Rs.4,130 crore in 2013-14. SpiceJet narrowed its loss to Rs.687 crore from a net loss of Rs.1,003 crore a year ago. The losses could have been more had SpiceJet continued its full operations and not benefitted from onetime gain of Rs.61 crore from an aircraft insurance claim.
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Air India is expected to report a loss of Rs.4,300 crore for 2014-15 compared to a loss of around Rs.5,000 crore in the previous year. IndiGo, though yet to announce the result for 2014-15, is expected to report a profit. In 2013-14, the airline had reported a profit of Rs.317 crore.
Recently, GoAir Managing Director Jeh Wadia claimed that the airline had reported 76 per cent improvement in operating profit in 2014-15 over the previous year without revealing the numbers. AirAsia India reported a net loss of Rs.19 crore in the fourth quarter.
Airline executives said their yields remained under intense pressure due to competition from new entrants such as AirAsia India and Vistara. The flash sales by some incumbent carriers to fill seats and to generate cash flow also put pressure on yields, they added.
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“While global oil prices dipped by over 60 per cent last year, the full benefit was not passed on to airlines. ATF in India is still 60 per cent costlier than that in competing aviation markets. Other costs such as aircraft leases, maintenance, airport charges and staff salaries have only grown. Airfares remained nearly flat except for a few headline grabbing last minute fares, which hardly contributed to profitability for airlines,” Amber Dubey, Partner and India Head of Aerospace and Defence at KPMG.
He said the industry has been suffering losses as the structural costs across airlines are high. “Only one airline, with well-negotiated contracts for aircraft lease, maintenance and ground handling; large fleet, low geographical spread and high aircraft utilisation per day, is profitable, with rest are struggling to cope. Had oil prices not fallen last year, the financial distress would have been even more drastic, with more than one airline folding up,” Mr. Dubey added.
According to analysts, the industry will continue to bleed in the near term. “The loss making trend will continue. The next two quarters will be challenging. I don’t think there will be any improvement in overall cost structure that will help airlines to turn around. Competitive pressure from new airlines will delay the recovery process,” said Vishwas Udgairkar, Senior Director, Infrastructure & Transport, Deloitte.