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India’s low cost carriers must turn profits quickly

12-Sep-2005

NEW DELHI (Centre for Asia Pacific Aviation) - Behind the prospects for rapid growth of India’s aviation market lie some major challenges, the Centre for Asia Pacific Aviation has warned. The Centre’s Managing Director, Peter Harbison, stated, “India’s new entrant carriers are presented with enormous opportunities, but they must maintain focus on profitability from day one”.

Investors are presented with a myriad of options in the Indian aviation sector, with planned listings by Indian Airlines, Air India, Air Deccan and Kingfisher Airways over the next 12 months and a host of start-up carriers seeking launch funding. SpiceJet only last week secured additional financing from foreign investors”, he said.

Only the most focussed and efficient operators will attract the level of funding required to survive what is likely to a brutally competitive 12 months ahead”, said Mr Harbison.

The warning comes as the heads of Indian and Gulf region full service and low cost carriers prepare to assemble in Mumbai for a major low cost airline symposium in the first week of October to discuss their strategies in India’s newly liberalised aviation market.

I expect some challenging questions will be asked of the speakers in terms of their profit targets, expected returns for investors and the ways they will differentiate themselves in an increasingly competitive market”, said Mr Harbison, who will be delivering one of the keynote addresses at the symposium.

Since April this year, four new Indian carriers have entered the market and seven or eight more will take off by this time next year. All carriers are hungry for capital. India’s start-ups will not only be competing for passengers, but also for investment dollars”, he said.

With fuel prices near record levels and staff shortages also raising costs, all carriers will be under pressure to perform. Infrastructure constraints at India’s airports also pose challenges for the sector; some airports will be big winners from the new growth, but there is a great need for new infrastructure investment too”, said Mr Harbison.

Two of the top 30 most profitable airlines worldwide are based in India - one is a full service carrier, Jet Airways, and the other is a freight operator, Blue Dart Express. India’s start-ups would be wise to follow the lead of Ryanair in Europe, GOL in South America, Southwest Airlines in the US and AirAsia in the Asia Pacific region, all of which achieve consistently good profit margins through an obsession with cost control and efficient operations”, said Mr Harbison.  AirAsia’s CEO, Tony Fernandes, will be speaking at the upcoming symposium, along with CEOs from many of the region's low cost airlines and startups.

The Second Annual Indian Subcontinent Low Cost Airline Symposium in Mumbai on 6-7 October 2005. The Symposium will be attended by delegates of every start-up airline in India, plus the key full service carriers from India and the Middle East, as well as top aviation officials and airport CEOs from across the region.


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