Airlines pull up socks
Meeting with Praful Patel was inconclusive mainly due to different airline pricing objectives
With mounting losses of the airlines mainly due to surging prices of aviation turbine fuel (ATF) and overcapacity, the aviation industry is tightening its belt after the meeting with Praful Patel, Civil Aviation Minister. The Minister assured all present that he would take the matter up to the Petroleum Minister and the Finance Minister.
Though the country’s largest low-cost airline has expansion plans, it has reported a loss of Rs1.10bn between April and June this year. Warwick Brady, COO, Air Deccan said remedial measures include “rationalizing some routes” and retracing “unprofitable capacity.” More India airways are poised to follow suit.
The meeting however was inconclusive, mainly due to highly distinctive views of Jet Airways and Kingfisher on one side and Air Deccan and Spice Jet on the other. While the former team harped on the requirement of an industry association that would ensure not too much price cuts, the later stood firm on their ground of aggressive price tactics; but the match was a draw and no conclusion was arrived at.
“Everyone has to find a way of profitable growth,” said Ajay Singh, Director, Spice Jet and eventually there was no consensus on the formation of an industry association.
Capt. G R Gopinath, CEO of Air Deccan, said, “These fat cats are urging the government to control price, discipline the LCCs and put up entry barriers for new players. Fortunately for us, the government has refused to do this.”
The point made by the Captain is that low-cost airlines are going to make relentless efforts to continue to reduce costs by flying more number of hours with higher number of seats. By migrating more customers to the Internet, Gopinath said, the airline aims to cut distribution costs by almost 20%.
On the other side, Vishwapati Trivedi, Chairman and Managing Director, Indian, said that even if the anticipated cut in ATF prices took place on October 1, the airline was unlikely to immediately pass it on to the consumer. This is because the airline would like to eye the trend in ATF prices for at least two to three months.