The Hindu Business Line : If airlines turn around…

Bangalore, Oct. 15 If domestic airlines turn around during the next two quarters which are generally the most profitable for the industry, the alliance between Kingfisher Airlines and Jet Airways may end up being short-lived, an airline analyst has said.

Another analyst with a brokerage firm said if Kingfisher Airlines had retained the low cost carrier (LCC) model as part of its service, it could have started posting operational profits by now. “The situation may not have been as bad as it is now,” he said.

An analyst with Frost & Sullivan told Business Line that there is a possibility that both the airlines may review their alliance if the next two quarters turn out to be good. “In the airline business, one quarter can make or break an airline,” Frost & Sullivan’s director for aerospace and defence practice, Mr Ratan Shrivastava, said.

Both the airlines are still in the process of integrating into their operations their respective merged entities: Sahara in the case of Jet Airways and Air Deccan in the case of Kingfisher Airlines. “Hence an external alliance might just be a short term arrangement,” he said.

He said even the government would not want a bloodbath in the airline industry and hence the alliance between the two major airlines might have been seen positively by the Civil Aviation Ministry.

Another airline analyst with a broking firm said that the LCC would have started making profits of around Rs 35 crore at the operational level around this time. He said before the merger of the two airlines, Deccan Aviation’s fuel consumption was about 20,000 kl per month when the fuel price was around Rs 45 per litre. The total fuel expense at that time was around Rs 40 crore per month. For 7 lakh passengers, the airline’s shortfall was around Rs 400 per passenger.

After the increase in fuel prices, the airline at current levels would have incurred an additional expense of Rs 40 crore per month. At 7 lakh passengers per month (which was the number of passengers the airline flew every month), it would have translated to about Rs 550 per passenger per month. As the average fare per passenger has gone up by Rs 3,000 per person now, even an increase of Rs 1,500 per passenger every month charged by Deccan Aviation, would have resulted in a profit of around Rs 35 crore in operational terms, the analyst said.

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