A battle for profitability!

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A battle for profitability!

It could soon be the rule of three again with three airlines dominating the skies.

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Excerpts from Power Breakfast on CNBC-TV18 Watch the full show » ALSO READ See latest News about Kingfisher Air See previous management interviews See what other Experts & Brokerages are saying about Kingfisher Air Kingfisher Air BSE | NSE 25/05/12 Are Mutual Funds betting on Kingfisher Air? Other Stocks in this news Jet Airways | SpiceJet |

This time around the battle in the Indian skies seems to be for profitability! The three major airline groups - Jet and Jetlite , Kingfisher with Deccan and Air India and Indian combine, seem focussed on bouncing back into the black. With over 80% of the market under their fold the task may be simpler, reports CNBC-TV18.

The three groups could dominate the fare structures in the market. Experts say come October and fares could go up by 10-15% and may be a tad more on the metro routes.

SpiceJet Director, Ajay Singh , said, "Consolidation is good. The industry was sealing fares below cost and this will help improve yields for all players, including the independent players."

For instance, a Mumbai-Delhi ticket on an average costs about Rs 2,500 on a low cost airline. Ideally a Rs 3,500 ticket would cover the cost for the airline . Similarly, a Delhi-Bangalore ticket that currently sells at Rs 3,500 should ideally be Rs 5,000 on an average.

But achieving this is long haul and complex that involves moving some flights from overcrowded routes to less serviced ones. In the bargain, fares on some non-metro routes are expected to come down. This consolidation will mean that full service airlines like Jet and Kingfisher will rationalise routes of their low cost arms Jetlite and Deccan to avoid any cannibalisation.

As Kapil Kaul , CEO, CAPA , explains, "I understand Jet is already cutting on the Del-Cal route and deploying in the Ranchis and Patnas and there is a sensible realisation, then why get them to compete."

Experts say that consoldiation in the Indian aviation industry happened faster than in most other countries. But consolidation may not yield immediate results unless the big three bring back price sanity in the market. But it will take at least a year and a half before the sector turns profitable.