Consolidation is the mantra

Low cost carriers

Low cost carriers

Low cost carriers growth in global

Low cost carriers growth in global

Some of India’s low-cost carriers are reportedly talking merger. This is good news for the beleaguered airline industry which risks serial bankruptcies if the present level of irrational pricing continues for long. The industry is already expected to report losses to the tune of Rs 9,000 crore in 2009-10.
There has been an industry-wide cut in capacity but not of the same order as the decline in traffic — in the third quarter average capacity dropped about 8% but passenger numbers fell nearly 20%. Overall seat factors have dropped nearly 10 percentage points from near 75% in the early parts of 2008.
International outlook is gloomier with industry data suggesting a deepening decline in passenger and freight demand. The disruption is more telling on the Indian airline industry as it was still in the early growth and investment stage when the crisis struck. The boom was largely driven by cheaper fares, though rising incomes contributed a fair share.
The low fares were, however, based more by a competitive rush for volumes than a supportive cost structure. Online booking, paid meals, fewer services, single aircraft type fleet and operational efficiency allowed some cost savings.
But infrastructure-related costs have proved daunting with on-ground and in-air congestion causing costs to rise and operational efficiencies to drop. And now airlines have to also levy a development fee on passengers for meeting the funds crunch faced by the airport developers. The option of secondary airports available to low-cost carriers in developed markets is absent in India.

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~ by anand213 on March 13, 2009.

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