Airlines in India see too many travelers, little supply

Aviation

Normally, airlines in India compete fiercely with each other to sell tickets in advance and fill seats during the peak summer travel season. This, to a large extent, also takes care of their working capital requirements. But airline operators in India are presently facing a different problem: scarce planes and booming demand. Moreover, the grounding of Boeing Co’s fuel-efficient, single-aisle workhorse – Boeing 737 MAX – is biting into Indian airlines’  summer schedules, threatening to disarm them in their seasonal war for profits. The 737 MAX was grounded worldwide in March following a fatal Ethiopian Airlines crash just five months after a Lion Air crash in Indonesia.

The crisis-ridden Jet Airways is suspending its international flights in the face of deep financial crisis and is staring at closure. The airline is currently operating just 7 aircraft. It used to have 119 airplanes a few months back. But that is history now. Fares on the India-Dubai route had soared following sudden withdrawal of nearly 13,000 seats operated by Jet Airways on the sector.

The timing of such a situation could not be worse for Indian air carriers. Planes run fullest during June, July and August, when airlines earn the most revenue per available seat mile. A decline in seat capacity could mean higher last-minute summer fares, particularly for business class travelers.

“The revenue is right in front of them. They can see it, but they can’t meet it,” said Nalin Chandra, an aviation industry veteran and NC airways founder. The Jet Airways situation has led to numerous cancellations of daily flights.

Jet Airways’ rivals Air India and SpiceJet are eyeing the beleaguered carrier’s flying rights to the lucrative India-Dubai route.The two airlines are learnt to have urged the Civil Aviation Ministry to allocate traffic rights to them, in case Jet fails to utilise the weekly seat quota granted by the government.

Gurgaon-based low-cost carrier SpiceJet, which has been on an expansion drive, also wants the government to allocate it the unutilised seats so that it could mount more capacity on the commercially profitable route.

SpiceJet is looking to add about 6,000 seats per week from about 12,800 seats per week now. The airline on Monday announced to operate flights to eight foreign destinations including Dubai from Mumbai. The new flights will be started by May-end.

Jet Airways is desperately looking for funds as it is making its last ditch effort to get an investor on board. “The government’s job is to protect the consumers and the sector and not necessarily an individual company. The promoters knew that the airline was in financial trouble almost a year back, yet they have been playing hard ball and negotiations have been stretched to the point that finding a credible buyer is going to be a real challenge,” said Dhiraj Mathur, partner, PwC.

He said that the drastic capacity reduction has sent fares into the stratosphere and threatens to jeopardize the sector’s phenomenal growth in the past decade.”Given this, the government should specify a very short time limit for concluding the resolution and then allocate the international traffic rights to other willing airlines who have the capacity,” he added.

Industry experts have supported the idea of allocating unutilised seat entitlements by Jet Airways, stating it will help consumers.

Travel industry veteran Rajji Rai also supported domestic airlines’ demand to re-allocate traffic rights given the twin issue of Pakistan banning overflying of Indian carriers over its airspace and Jet crisis pushing the fares northward.

“Due to restrictions imposed by Pakistan flying time to Dubai went up thus burning more fuel. Jet crisis added to the problem. The government must not allow Emirates to take over the India-Dubai sector,” he added.

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