Soaring competition in domestic skies cuts into profits

Soaring competition in domestic skies cuts into profits
Vinay Kumar
Consolidation is perhaps inevitable: Economic Survey
Rapid growth of economy accompanied by sharp increase in air traffic
Airport Economic Regulatory Authority to foster healthy competition
NEW DELHI: With increasing competition in domestic skies, the profitability of the domestic airline industry is under tremendous pressure as almost all operators are reported to be making losses, according to the pre-budget Economic Survey 2007-08 presented in Parliament on Thursday.
“Given the intense competition among the airlines and the declining margins, a process of consolidation is perhaps inevitable.” The process has already commenced, and the recent mergers and acquisitions in the public and private sectors are expected to enable the airlines to increase revenues through synergies in operations and by ensuring optimal utilisation of resources in this capital-intensive sector.
After the merger of the national carriers Indian Airlines and Air India into the National Aviation Company of India Limited, the new brand entity Air India is expected to provide an integrated international and domestic footprint, which will enhance options to the customer, improve load factors and yields on commonly serviced routes and allow easy entry into one of the three global alliances.

Noting that the civil aviation sector underwent dramatic expansion during X Plan period, the Survey says the rapid growth of the economy, especially during the last four years, has been accompanied by a sharp increase in the volume of air traffic. Aircraft import
There are 14 scheduled operators having 334 aircraft. During 2007, they were given permission to import 72 aircraft. The Civil Aviation Ministry has given “in-principle” approval for the import of 496 aircraft. In the next five years, more than 250 aircraft are likely to be acquired by the scheduled operators. There are also 65 non-scheduled operators who have 201 aircraft in their inventory.

“The explosive growth in air traffic has made it imperative to rapidly expand infrastructure to ensure safe and efficient handling of air traffic,” says the Survey.

On upgrading the Chennai airport, it says an Inter-Ministerial Group has approved an action plan for expansion of the international and domestic terminal buildings to handle an additional 13 million passengers per annum and major airside works including extension of the secondary runway at a cost of Rs. 1,808 crore, for completion in June 2010.

The government has decided to set up an Airport Economic Regulatory Authority that will help in fostering healthy competition among airports by creating a level-playing field and encourage investment in airport facilities. I

nfrastructure

The Survey says the main objective of the aviation sector as set out in XI Plan is to provide world-class infrastructure and safe, reliable and affordable services. Apart from developing major and greenfield airports, modernisation of Air Traffic Management is envisaged.

Link:http://www.hindu.com/2008/02/29/stories/2008022959501300.htm