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Match capacity with demand: IATA advises Indian carriers

The number of aircraft in the Indian sky should be controlled to match the demand of air travellers if the Indian carriers want to come out of the financial rut, global airlines' body IATA has recommended.

business Updated: Jun 13, 2010 13:10 IST

The number of aircraft in the Indian sky should be controlled to match the demand of air travellers if the Indian carriers want to come out of the financial rut, global airlines' body IATA has recommended.

"In India, there is a problem of managing capacity in a more effective way -- you have put too many planes at a time when you were caught in a crisis. The market was in difficult situation," IATA Director General and CEO Giovanni Bisignani told Indian journalists in Berlin.

Asked why Indian airlines were not as profitable as those in Latin America despite a high GDP growth, he said "one of the issues is the capacity problem".

IATA has estimated that Latin American carriers will show a profit of $900 million, making it the only region to post two consecutive years of profit.

The IATA chief indicated that in a race to capture the emerging market, the Indian airlines competed among themselves to introduce more planes and flights leading to an excess capacity and low fares, which hit their financial bottomline.

"One of the problems we have is we go for capacity. Capturing market share is a short-term strategy, being profit centric is required in the medium term. Market share cannot be the only motive of the industry," he said on the sidelines of the just-concluded IATA Summit.

He said there was a need to match capacity with demand so that the airlines can enhance their yields, which were currently low.

Asked about the overall situation facing the aviation industry in India, he said generally the governments, or specifically the Finance Ministries, the world over were not being supportive of the sector.

"Unfortunately, what happens is that the Government - as is the case in many countries --is not supporting the aviation ministers. At present, the Government is the Ministry of Finance all around the world," Bisignani said.

Observing that "one of the problems" in India was that the processes took much time to be implemented, he said "but, an example of a process that took so long but the good part now is the new regulator" or the Airport Economic Regulatory Authority (AERA).