Indian carrier losses return in 2Q2012, high structural challenges remain

1QFY2012/13 marked the best result in 18 months. In the three months ended 30-Jun-2012 all private Indian carriers, with the exception of Kingfisher, were profitable, albeit that in several cases this was as a result of sale-and-leaseback and other income.

1QFY2012/13 reflected two key trends faced by Indian carriers. On the one hand, improved matching of demand and supply (largely as a result of the contraction of capacity by Kingfisher), combined with greater pricing discipline resulted in a substantial increase in average yields which contributed significantly to the improved performance.

But this was offset by a hostile cost environment primarily related to high fuel prices and a weak currency. The particularly strong performance by Air India, which achieved the highest average fare and reported a small operating profit on domestic operations, reflected the changing market dynamics.