India’s airline sector anticipating more consolidation

India’s booming airline industry will see further consolidation by 2010 amid growing competition, rising costs and over-capacity along key routes, an industry body said on 13 June.

At least fourteen new airlines such as Easy Air, Trans India and Star Air are seeking government approval to launch operations.

From just three private airlines in 2003, the number has jumped to ten, including low-cost carriers such as SpiceJet, Go Air, Paramount Airways and IndiGo. “Carrier rationalisation along key routes is required, as we see over-concentration of seat capacity along main routes,” said Kapil Kaul, chief executive with responsibility for the Indian subcontinent at the Centre for Asia Pacific Aviation (CAPA) on 13 June.

“Greater consolidation is expected to continue... in the form of strategic alliances, market exits and buyouts of smaller airlines,” he said on the last day of a three-day aviation summit in India’s financial capital. India’s low-cost carriers (LCCs) captured 35% of market share in April this year, Kaul said.

These budget carriers are likely to double their market share by 2010 -- one of the highest in the world, the CAPA said in a recent report on the Indian subcontinent. The performance of two new LCCs -- Air India Express and JetLite (formerly Air Sahara) -- in the domestic market is likely to be closely watched.

“The overall picture in India for present is one of growth, but against a backdrop of extreme, and mounting, unprofitability,” the CAPA report said. India’s airline industry lost 500 million dollars in the year ending March 2007, spurring domestic players to buy rivals.

The country’s largest domestic carrier Jet Airways bought competitor Air Sahara for nearly 340 million dollars in April, followed by a deal between Kingfisher and Air Deccan airlines in May.

India’s airlines have expanded aggressively in recent years, with about 480 aircraft on order for delivery through to 2012.

Source: Wall Street Journal