Cheaper fuel lifts Indian carriers on efficiency drive

India’s airlines are showing signs of improvement in their latest results, helped by lower oil prices and efforts to boost their performance.

SpiceJet on Tuesday reported a net profit of 718 million rupees (Dh41.2m) in the quarter between April and June compared to a loss of 1.24 billion rupees in the same period a year earlier.

This was driven by lower fuel prices and more efficient use of the airline’s fleet.

Mahesh Sharma, the minister of state for civil aviation, a day earlier revealed that Air India had reduced its net losses to 55.47bn rupees in the last financial year to the end of March compared to 75.59bn rupees in the financial year of 2011 to 2012, helped by improvements in seat factors and on-time performance.

Edelweiss Securities, based in Mumbai, has predicted a profit of 343m rupees for Jet Airways in the quarter to the end of June compared to a loss of 2.17bn rupees a year earlier.

“The domestic aviation industry has seen strong growth in this quarter,” Edelweiss said. “In line, we expect Jet Airways to report a 28 per cent year-on-year growth in passengers. The benefit of lower fuel costs will reflect in this quarter also.”

Airline losses in India could reduce by 40 per cent this year, according to Capa.

It expects the industry’s financial performance to improve in the current financial year, predicting that total industry losses could decline to between US$680m to $750m, assuming an oil price of $60 to $70 per barrel. It forecasts that low-cost carriers will generate a combined profit of $200m to $220m, while full-service carriers will post losses of $900m to $950 m.

But Capa warns that “a failure to maintain pricing discipline is the key risk to improved financials”, as Indian airlines offer aggressive discounts on fares to fill seats.

“During the peak first quarter of [the current financial year] carriers have been observed pursuing volume ahead of yields which is ultimately negative for the industry overall,” it said.

A sudden rise in fuel prices would also be a risk, it added.

Mr Sharma said that an assessment of the impact of financial stress on the safety of operations of private scheduled airlines was conducted last year by the DGCA.

“It has been found that all private airlines are in varying degree of financial stress,” said Mr Sharma.

“The findings of the audit have been individually discussed with the top management of the airlines and they have been asked to optimise their operations and reduce the financial burden without compromising the safety of aircraft operations.”

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Rebecca Bundhun

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