ADVERTISEMENT

Empty Seats Rise For Indian Airlines First Time In 10 Quarters

Indian airlines took a leaf out of the telecom operators’ playbook. Here’s how...

Economy class seats of a Boeing passenger aircraft. (Photographer: SeongJoon Cho/Bloomberg)
Economy class seats of a Boeing passenger aircraft. (Photographer: SeongJoon Cho/Bloomberg)

Indian airlines took a leaf out of the telecom operators’ playbook—take fewer customers but charge a higher price.

Occupancy fell for the first time in 10 quarters in the three months ended December as carriers increased ticket prices to cover higher costs, according to Directorate General of Civil Aviation data. The passenger load factor—the percentage of seats filled—declined 296 basis points over the previous quarter to 84.9 percent.

Opinion
India’s Air Passenger Traffic Growth At 16-Quarter Low In Holiday Season

Operating costs rose because of higher crude prices and a weaker rupee. The price of aviation turbine fuel, which accounts for more than a third of the total cost, rose more than 30 percent over the year-ago quarter.

For an airline, most expenses are dollar-denominated. What that means is that if the Indian rupee weakens, the carriers need to shell out more. In the quarter ended December, the rupee depreciated 11 percent year-on-year.

The top three airlines that control close to 70 percent of the aviation market on an average saw a three percent growth in their yields—a measure of average earnings per passenger per kilometre.

They continued to report a combined loss, largely because of Jet Airways Ltd. that’s battling a cash crunch and has agreed to cede control to lenders. The airline reported a loss of Rs 588 crore in the quarter ended December against a combined profit of Rs 246 crore by InterGlobe Aviation Ltd., the operator of IndiGo, and SpiceJet Ltd.

But even IndiGo and SpiceJet reported profit largely due to other factors and not core operations. SpiceJet’s bottom line was boosted by cash incentives booked while inducting new aircraft and a higher treasury income. For IndiGo, no tax expense, higher other income and forex gains aided the profit.

Rising costs hurt operational performance. IndiGo and SpiceJet’s were hit by higher fuel prices. IndiGo’s costs rose at the lowest pace among peers, partly aided by the induction of new fuel-efficient aircraft. The carrier inducted 19 planes during the quarter.

For Jet Airways, both fuel and non-fuel costs contributed. Its cost per seat kilometre rose 14 percent despite various cost-cutting initiatives.