Search the Internet          Tips  Sites: Finance, Investment

IA losing altitude in domestic market

Government-run Indian Airlines' share of the domestic air travel market sank below 40 per cent for the first time ever in March, and the government said the carrier would likely post a third straight loss this year.

Figures compiled by the Director General of Civil Aviation show that the former monopoly's share of the $1.4 billion domestic market in the difficult January-March quarter fell further behind leader Jet Airways, the big winner of India's move last decade to open the domestic air market to competition.

Separately, Civil Aviation Minister Syed Shahnawaz Hussain told a parliamentary committee on Wednesday that Indian Airlines is expected to post a loss again this year.

"The fall in market share is directly related to the capacity private operators have added," Robin Pathak, spokesman for Indian Airlines, told Reuters on Thursday.

He did not elaborate but the continuing losses and market share erosion adds urgency to Indian Airlines' proposal to the government for authorisation to spend $2.1 billion over five years to acquire 43 new aircraft.

In late March the airline finalised a proposal to buy the aircraft from Airbus, fitted with CFM-65 engines jointly made by General Electric Co and Snecma, a state-owned French company. The proposal must be approved by the government.

Indian Airlines wants to renew its ageing fleet of 56 aircraft to arrest a decline in market share triggered in part by delays and flight cancellations caused by mechanical problems.

Last year the government failed to find any takers when it offered to sell a 26 per cent stake in Indian Airlines to a strategic partner, in part because of the amount a new partner would need to invest to turn the airline around.

The divestment ministry has said it intends to try again this year to sell a strategic stake in the airline.

LOSING ALTITUDE

Pathak said the domestic market shrank by 6-7 per cent in the January-March quarter compared to the year ago.

Indian Airlines' market share sank to 39.9 per cent in March, sliding from 40.5 per cent the previous month and 41.4 per cent in January, according to government data.

Privately owned Jet Airways' market dominance grew slightly to 48.9 per cent in March from 48.7 per cent in January.

Tiny Air Sahara posted the most significant change by increasing its market by almost two points to 6.4 per cent.

Lucknow-based Air Sahara flies to only 13 destinations, but recently added three more planes to its fleet. It now has nine Boeing 737s.

Jet Airways and Indian Airlines both have much bigger fleets and fly to more destinations. Jet Airways has 38 aircraft and operates 245 flights daily to 44 domestic destinations. Indian Airlines flies 210 flights daily to 85 destinations -- 68 domestic and 17 overseas.

Hussain said Indian Airlines was expected to prune its loss to Rs 900 million for the year to March 2003, from around Rs 2.5 billion for the just-ended financial year.

The loss would narrow despite aviation fuel prices remaining high and the cost of insurance tripling to Rs 1.85 billion in the wake of the July 2001 Tamil rebel attack on Colombo airport and the attacks last September in the United States, he said.

Hussain also said the on-time performance of Indian Airlines improved markedly last year, to a record high 88 per cent from 67 per cent the previous year.

ALSO READ:
The Rediff Budget Special
Money

Tell us what you think of this report