Indian aviation girds up for recovery
The cost-cutting measures adopted in the wake of spiralling jet fuel prices, and the subsequent softening of crude oil prices, are expected to expedite the turnaround.india Updated: Nov 03, 2008 21:27 IST
The airline industry seems to be on a recovery path, finally. The cost-cutting measures adopted in the wake of spiralling jet fuel prices, and the subsequent softening of crude oil prices, are expected to expedite the turnaround.
Even though it is estimated it will lose Rs 9,000 crore in 2008-09, it is becoming evident that the damage will not as severe as feared.
Reduction of capacity, shelving expansion plans and increasing fares are high on agenda. And even though a few employees will undergo temporary hardships, the survival of the sector is more important, say experts.
“The road to recovery has started. But capacity must reduce by 40 per cent. If the industry can achieve this and cut costs, then there is definite future,” said Ankur Bhatia, executive director, Bird Group, a Delhi-based aviation consultancy.
As many as 24 airlines around the world closed down during the crisis, but Indian carriers have survived the turbulence.
And now the focus is entirely on turning around.
Jet Airways and Kingfisher Airlines are set to return or lease out 20 aircraft. This would reduce substantial capacity and employee cost.
Jet has initiated talks to lease out six wide-bodied (Boeing 777-300 and Airbus 330-200) aircraft, two of which are on the ground. It will also return four Boeing 737 aircraft whose lease is expiring.
Kingfisher Airlines has decided to return eight Boeing 737 aircraft, mostly from erstwhile Deccan. Previously, it had returned two aircraft.
“The softening of fuel prices has resulted in an improvement in the company’s performance in September. Further drop in fuel prices will help us in future,” Kingfisher Airlines said in a communication to stock exchanges.
Employee cost is being brought down. Jet Airways has cut retention bonus given to its engineers, technicians. Engineers’ salary has come down by Rs 20,000 a month, technicians are taking a hit of Rs 5,000.
Low cost carriers are also looking up. SpiceJet has hired a new CEO, the former head honcho at USA’s private jet service provider Flight Options. Go Air is luring corporates and IndiGo has a well thought out business plan.
The aviation industry may be down, but not out.