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Indian carriers set to fly into profit zone in Oct-Dec quarter

Indian carriers set to fly into profit zone in Oct-Dec quarter

business Updated: Jan 26, 2015 23:15 IST
HT Correspondent
HT Correspondent
Hindustan Times
SpiceJet,Indian aviation,Aviation sector

Most Indian carriers are likely to report profits in the October-December quarter on the back of falling global crude prices and financial problems plaguing SpiceJet, which saw the budget airline drastically scale down operations.

Global crude prices have plummeted by almost 60% — from $110 a barrel in June 2014 to close to $45 per barrel. Aviation turbine fuel (ATF), or jet fuel, is the single-largest element contributing to airlines’ costs in India and accounts for nearly 50% of the operating cost of the carriers.

Indian carriers could save up to $400 million (Rs 2,480 crore) in 2014-15 on account of lower fuel prices, aviation consultancy firm Centre for Asia Pacific Aviation (CAPA) has said. CAPA estimates Jet Airways will post a profit of Rs 120-180 crore during the October-December quarter, which excludes all extraordinary one-time costs including profits from the slump sale of it’s frequent flier programme. Jet had reported a loss of Rs 267.89 crore in the corresponding quarter of 2013.

Both IndiGo and GoAir will be profitable in the third quarter, CAPA said. “December was the best-performing month for all carriers — both yields and passenger load factors rose due to SpiceJet’s challenges,” said Kapil Kaul, South Asia CEO of CAPA.

While IndiGo, whose market share rose to 36.1% in December, will significantly increase its profits in 2014-15 compared to 2013-14, GoAir could be heading for its best-ever result, subject to the fourth quarter (Januray-March) performing to expectations, CAPA said. “IndiGo continues to be an outperformer,” Kaul pointed out.

The October-December period was the best-performing quarter in the recent times for national carrier Air India and viability of its international operations rose due to lower oil prices and the induction of B787 Dreamliner. CAPA estimates that SpiceJet, which has cancelled over 2,000 flights since December 2014 and has cut 115 flights daily, will post a loss of Rs 240-300 crore, excluding all extraordinary one-time items. SpiceJet had posted a loss of Rs 172.80 in the year-ago period.

“Lower oil prices have significantly reduced SpiceJet’s third-quarter loss, which could have been, otherwise, significantly higher,” Kaul said. Indian carriers, Kaul said, will add 12 aircraft in the current quarter and about 30 planes in 2015-16. Noting that India’s beleaguered aviation industry was starting to see signs that could possibly mark the beginning of a structural turnaround in its fortunes, CAPA said the sharp decline in fuel prices was a major source of relief in a market where aviation turbine fuel is subject to some of the highest taxes in the world.

First Published: Jan 26, 2015 22:57 IST