India budget airline Deccan 15 mths to June net loss 3.4 bln rupees


New Delhi (XFNews-ASIA) - India's biggest low-cost airline Air Deccan reported a net loss of 3.40 bln rupees for the 15 months to June, on turnover which it said jumped 322 pct to 13.52 bln rupees.

It gave no comparative figures for that period.

For the 12 months to June, Air Deccan posted a loss of 2.30 bln rupees, up from 190.5 mln rupees in the previous 12 months.

But it said it will be making profit by 2008-2009.

The country's pioneer no-frills carrier, launched in August 2003, blamed the lion's share of its loss on efforts to build market share through launching 56 new routes that it said would lead to future profits.

"These are growing pain losses," Air Deccan financial director Mohan Kumar was quoted by Agence France-Presse as saying.

Kumar added that the airline plans to raise 100 mln usd from a consortium of banks to fund further expansion over the next 15 months.

"We expect by 2008-09 to be in profit" despite "fierce competition" from a slew of new entrants in the market, Kumar said.

With a fleet of 34 aircraft, Air Deccan outranked state-owned domestic carrier Indian Airlines in June to become the country's second-largest carrier behind privately owned Jet Airways.

"This strong market share is of strategic advantage as it will be the springboard for our future expansion, growth and profitability," airline managing director GR Gopnath said in a statement.

Half a dozen carriers, many of them budget airlines, have taken flight in the past three years in India's liberalized skies once dominated by state-run companies, and at least two more airlines are readying for takeoff.

Airline promoters have been lured by an increasingly affluent middle class in the country of over one billion people.

The passenger market is forecast to grow by 30 - 35 pct this year after expanding by 25 pct last year. Some 25 mln people flew last year, 15 mln for the first time, experts say, and the number is tipped to grow to about 50 - 60 mln by 2010 as salaries increase.

But the balance sheets of many airlines are covered in red ink as stiff competition has forced down fares in many cases to the price of train travel and sometimes even lower.

Air Deccan's loss, which it also blamed on higher fuel costs, came weeks after a senior official of US aerospace giant Boeing said airline seat overcapacity was leading to "low-fare madness" that threatened the sector's viability.

Analysts have forecast in the next 12 months India's aviation industry will have to consolidate through mergers and takeovers.

Kumar said he expects carriers will be able to start charging higher fares by 2008-09 as passenger numbers catch up with seat capacity.

"We feel the market will have matured enough so that the existing operators would be able to charge rationally," he said.

"The market is moving in a trend where you're likely to see the explosion in (passenger) numbers that you've seen in the automobile or mobile phone industry (in India)," he said.

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