Passengers swell by 18.6% on MoM basis, despite fuel price hike
For the Indian aviation industry, August 2011 appears to have been a good month. The passenger traffic increased by 18.6 per cent on a month-on-month basis, notwithstanding the aviation turbine fuel price hike and rupee depreciation in the last few weeks.
Directorate General of Civil Aviation data reflected that airlines carried 4.8 million passengers against 3.989 million passengers during the corresponding period a year ago. For the first eight months of the calendar year, airlines carried 39.7 million passengers marking a 20 per cent increase over the previous year.
But the increase in passenger load factor was in sharp contrast with the seat factor of the industry, which actually fell on a month-on-month basis. The seat factor measures the capacity utilisation and refers to the number of occupied seats. According to DGCA data, top airlines saw a sharp drop in the seat factors. Kingfisher and Jet seat factors fell to 76 per cent and 73 per cent respectively — a drop of 4 and 3 per cent respectively on a month-on-month basis.
The DGCA data also showed a jump in the available seat kilometres as opposed to the required seat kilometres. These numbers indicate the availability of seats against the demand. In August 2010, the ASKM was barely 8 per cent against a requirement of over 10 per cent. In 2011, the situation had reversed when ASKMs was about 17 per cent against the requirement of barely 15 per cent indicating that the industry was heading towards an excess capacity.
But, KPMG’s director (aviation) Amber Dubey said, “This typically happens when capacity additions happen. Airlines have learned their lessons well, and capacity additions are happening at 12 per cent per annum. Consequently, 80 per cent seat factor will be achievable in the third quarter when passenger yields tend to be high and when airlines make money.”
The industry meanwhile is passing through a rough patch. High fuel costs have prompted the country’s largest private air carrier to hike ticket prices. The fuel consumed by an aircraft presently costs Rs 60,000 per kilo litre. The squeeze on the industry has prompted the civil aviation ministry to exert pressure on the states to cut back on the sales taxes on aviation fuel. However, barring Chhattisgarh that levies a duty of just 4 per cent, other states are unwilling to rollback taxes in excess of 15 per cent.
Industry officials say there would be no respite on the financial squeeze in the immediate future unless the fuel prices come down. Fuel costs consume around 40 per cent of an airlines’ operating expenditure these days. The other high cost component in an airlines balance sheet is the cost of servicing lease rentals. With a bulk of the industry operating on either leased aircraft or with fleet acquired on foreign debt, a rupee depreciation of 12 per cent since the beginning of this year has hit them hard, official say.
The only carriers that would be in a position to somewhat absorb the shocks of exchange rate depreciation would be those with international operations, where foreign currency earnings act as a natural hedge against currency volatility.
Directorate General of Civil Aviation data reflected that airlines carried 4.8 million passengers against 3.989 million passengers during the corresponding period a year ago. For the first eight months of the calendar year, airlines carried 39.7 million passengers marking a 20 per cent increase over the previous year.
But the increase in passenger load factor was in sharp contrast with the seat factor of the industry, which actually fell on a month-on-month basis. The seat factor measures the capacity utilisation and refers to the number of occupied seats. According to DGCA data, top airlines saw a sharp drop in the seat factors. Kingfisher and Jet seat factors fell to 76 per cent and 73 per cent respectively — a drop of 4 and 3 per cent respectively on a month-on-month basis.
The DGCA data also showed a jump in the available seat kilometres as opposed to the required seat kilometres. These numbers indicate the availability of seats against the demand. In August 2010, the ASKM was barely 8 per cent against a requirement of over 10 per cent. In 2011, the situation had reversed when ASKMs was about 17 per cent against the requirement of barely 15 per cent indicating that the industry was heading towards an excess capacity.
But, KPMG’s director (aviation) Amber Dubey said, “This typically happens when capacity additions happen. Airlines have learned their lessons well, and capacity additions are happening at 12 per cent per annum. Consequently, 80 per cent seat factor will be achievable in the third quarter when passenger yields tend to be high and when airlines make money.”
The industry meanwhile is passing through a rough patch. High fuel costs have prompted the country’s largest private air carrier to hike ticket prices. The fuel consumed by an aircraft presently costs Rs 60,000 per kilo litre. The squeeze on the industry has prompted the civil aviation ministry to exert pressure on the states to cut back on the sales taxes on aviation fuel. However, barring Chhattisgarh that levies a duty of just 4 per cent, other states are unwilling to rollback taxes in excess of 15 per cent.
Industry officials say there would be no respite on the financial squeeze in the immediate future unless the fuel prices come down. Fuel costs consume around 40 per cent of an airlines’ operating expenditure these days. The other high cost component in an airlines balance sheet is the cost of servicing lease rentals. With a bulk of the industry operating on either leased aircraft or with fleet acquired on foreign debt, a rupee depreciation of 12 per cent since the beginning of this year has hit them hard, official say.
The only carriers that would be in a position to somewhat absorb the shocks of exchange rate depreciation would be those with international operations, where foreign currency earnings act as a natural hedge against currency volatility.
