Market share seen at 25-26% by FY07-end: Air Deccan

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Market share seen at 25-26% by FY07-end: Air Deccan

MD of Deccan Aviation, GR Gopinath says, average load factor at 75%, Margins will be better going forward but for 6-9 months they will be impacted. Margins to remain subdued for 6-9 months. Will take 9-12 months to become profitable and market share seen at 25-26% By FY07-end.

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Aviation has staged a come back after being down in the dumps for the last many months, it is a clear resurgence of interest among investors in the sector, spiked by fare hikes and ATF going down. Captain GR Gopinath, MD of Deccan Aviation comments on the same.

MD of Deccan Aviation , GR Gopinath says that the average load factor stands at 75%. According to him, margins will be better going forward. However, he says that margins will remain subdued for 6-9 months.

He further adds that it will take 9-12 months to become profitable and sees Air Deccan's market share at 25-26% by FY07-end.

Excerpts from CNBC - TV18's exclusive interview with GR Gopinath:

Q: Is some sense finally dawning on aviation plays that they can't go on battling the price front and run each other out of the market?

A: That was always there, not just as though people have suddenly realized that they had to be in profit, and profit is fundamental to any business, whether it is a low cost airline or a full service airline or aviation sector as a sector, but it is the nature of the business.

Too many players suddenly came in, there is little excess capacity, which is always a case in any emerging market, when too many players come in.

But if you look at the overall demographics, trends and the bigger picture with the GDP that is growing, the various industries going at double digit growth, less than 2% Indians traveling by air,  this sector has to explode like any other sector and the question is how soon will airlines make money.

Everybody was very pessimistic because airlines were losing money. But it is in the nature of things, I don't understand why aviation should be outside market forces.

Q: So is the fare hike decision a long-term arrangement, some kind of cartelization agreement or is it a near term peak season arrangement that aviation companies have struck between themselves?

A: Thanks to the open sky policy, it should even come in the international sector. The question of protecting existing airlines from new players was a trend earlier to protect the existing players like Indian Airlines and Air India from competition. Now we have seen exactly what is happening in the domestic sector.

Right now, they are trying to protect the two players in the international market, which is again shortsighted. So, there is no question of cartelization - cartelization can never take place. The kind of number of players that are there and with everybody doing dynamic pricing today, it is very difficult for you to really pin down any point in time and say that somebody has increased the price.

Air Deccan started this e-ticketing, call center booking and we also started dynamic pricing which is basically trying to sell at a higher price during the high seasons that is tourist season, then sell at a cheaper rate - for instance, the hotel industry.

So everyday your prices change depending on the kind of competition, depending on the kind of load factor, the sector is very dynamic and obviously everybody has to sell above their cost, whether it is Udipi Hotel or an Oberoi Hotel or Air Deccan or Jet Airways . The sector is very promising in the long term and also in the short term but maybe there is a temporary aberration right now.

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