With Jet out of skies, sector may fly into profit

The exit of Jet Airways from the civil aviation scene has changed the outlook of the airline sector from negative to positive, according to an aviation consulting firm.

In its latest forecast, the Centre for Asia Pacific Aviation (CAPA) revised its FY20 profitability outlook from a consolidated loss of $550- $700 million to a profit of $500-$700 million for the sector.

“India’s leading airlines are expected to report record profits, while Air India could break even at a net level. Low cost carriers are likely to report a combined profit of $500-$700 million, of which IndiGo alone could account for $400-$500 million,” CAPA said in its Q1 Outlook.

It said while SpiceJet and GoAir will make profit, AirAsia India and Vistara could be close to break-even for the first time since they launched operations over five years ago.

AI may break even

Air India could break-even (or have a small loss) at a net level for the first time in over a decade, it added.

“The above projections are assuming oil at $70-$75/barrel and the U.S. dollar trading at ₹70-72, and are subject to airlines maintaining pricing discipline,” CAPA said.

Most of the domestic capacity lost as a result of Jet’s closure would be restored by the end of the Q2 but the recovery in the international sector would take a year or two.

“Domestic traffic growth will be muted, with full-year traffic growth expected to be below 5% year on-year. This will largely be as a result of growth picking up from Q3, with traffic expanding by 5-8% in the second half.

The high double-digit growth rates observed during the last five years are unlikely to return for the foreseeable future,”it said.

International traffic is likely to be flat at best, and could show a slight decline of up to 5%. Growth is expected to resume from FY21. “Jet’s closure leaves a notable gap in the international market. As a result Indian carriers will increase their focus overseas. Indian LCCs are expected to deploy 40 additional narrow bodies (planes) on regional international routes in FY2020,” it said.

Prior to operations being impacted, Jet Airways accounted for 13.8% of domestic and 12.3% of international seats across India, but its share was higher at Mumbai and Delhi airports at 31% and 15% respectively.

For the international sectors, Jet had a market share of 28.5% from Mumbai and 14.5% from the Delhi airport.

So, with Jet out of the picture, the trunk route of Delhi and Mumbai had seen a capacity drop of 23% while eight international routes had seen double-digit growth as Jet was a dominant player in these sectors.

In the Mumbai-London sector, Jet had a market share of 57.3%.

In the Delhi-Doha sector, it had a market share of 32% while in the Delhi-Kathmandu sector it had 38.3% market share. In the Mumbai- Bangkok sector it had a market share of 35.7% while in the Mumbai-Dubai sector it controlled 29.4% of the market. Thus, most sectors in south East Asia and West Asia, have seen growth as other airlines have stepped in.

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Printable version | Oct 21, 2021 2:09:21 AM |

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