MARKET ANALYSIS
22 October 2018 · AV I A T I O N B U S I N E S S http://www.aviationbusinessme.com
Global carriers have fl ocked to India, lured by a domes-
tic travel boom. But can they survive the ruthless com-
petition – and are there warnings for other regions?
By Anurag Kotoky and Shayan Shakeel
J
ET Airways India, one of the fi rst
carriers to launch after the mar-
ket opened up in the early 1990s,
said in a fi ling this month that it
needs cash to meet liquidity require-
ments. Its stock price is in a free-fall
and the company’s board, which
deferred announcing earnings by
more than two weeks, is due to meet
Monday to discuss austerity measures
and a turnaround plan.
It ’s t he latest sign of fi nancial distress
i n a ma rket beset by a cr ush i ng fa re wa r
that’s made life diffi cult for foreign car-
riers, ranging from Malaysia’s low-cost
AirAsia Group to Singapore Airlines, not
to mention a teeming fi eld of domestic
players. The competition is set to intensify
if certain other airlines follow through
with proposals to start short-haul airlines
in the country soon.
The Indian commercial aviation
industry has pretty much been in
shakeout mode ever since the gov-
ernment ended a state monopoly
enjoyed by Indian Airlines in 1994.
Debt-burdened Kingfisher Airlines
ended operations in 2012 – and 10 other
domestic carriers remain locked in a
largely profi tless struggle for passengers,
despite operating in the world’s fastest-
growing market.Tight Lid
Still, not all Indian carriers are losing
money. IndiGo, which started in 2006
with a focus on on-time fl ights and ultra-
cheap tickets, has managed to keep a
tight lid on costs.
Commanding discounts with big plane
orders and lease-back deals, IndiGo has
never lost money since going public in- Its fl eet of planes is also newer and
more fuel-effi cient than many rivals.
In contrast, Jet Airways is bogged down
by higher costs. Besides carrying the
burden of being a full-service carrier,
the average age of its fl eet is almost nine
years, costing more to maintain.
Jet Airways Chairman Naresh Goyal,
who started the carrier in 1993 as a little-
known ticketing agent, told shareholders
on August 9 that he was “embarrassed”
by the poor performance of the airline.
The stock, down 67 percent in 2018, is
headed for its worst year since 2011.
Group cash holdings at Jet Airways,
in which Etihad Airways PJSC owns a 24
percent stake, dwindled to $46m at the
end of March, the lowest since at least- It needs to repay about $445m of
debt coming due by March 31. Lenders
are reluctant to extend additional loans,
while it is in talks with Blackstone Group
LP to sell a stake in its frequent-fl yer
loyalty program, people familiar with
the matter said this month.
The market share of Jet Airways has
more than halved to 15 percent from as
h igh as 36 percent i n t he m id-2000s. It has
reported profi t in only two of the last 11
fi nancial years, thanks to low oil prices.
The aviation industry is no stranger
to the vicissitudes of fuel prices and
fi erce competition. They have landed
TWO-CENT FARES ARE
KILLING AIRLINES IN INDIA’S
CUT-THROAT MARKET. IS
THE GULF NEXT?