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Last Updated : Aug 14, 2019 12:42 PM IST | Source: Moneycontrol.com

After a period of turbulence, the aviation sector finally sees clear sky

Has the demise of Jet Airways given new wings to Indian aviation?

Suyash Maheshwari @Suyashm9
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After a year of distress that saw the grounding of Jet Airways and decommissioning of the entire Boeing 737 MAX fleet, dark clouds finally seem to be parting on the Indian aviation sector.

According to IATA’s global aviation results, India's domestic air passenger volume—measured in revenue passenger kilometres (RPKs)—was the third-highest among the major aviation markets, rising  7.9 percent compared to the corresponding month of the previous fiscal.

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The massive void left behind by the demise of the Naresh Goyal-led airline also seems to be filing up as other major players such as SpiceJet, IndiGo and Vistara introduced extra flights to take on the severe flight crunch.

The grounding of Jet has also bolstered the business of its competitors, who posted robust earnings in the quarter ended June 2019.

IndiGo, which took over 30 percent of Jet's domestic slots available in Delhi and Mumbai airports, posted its highest-ever quarterly profit at Rs 1,203 crore in Q1FY20. This was 43 times higher than the profit in the year-ago period.

SpiceJet, which acquired 63 domestic and international slots of Jet, also posted its highest-ever quarterly profit in Q1FY20, after reporting a loss in the corresponding quarter of the last fiscal.

"Since the grounding of Jet, players like Indigo, SpiceJet have taken a front seat and are filling in the slots of Jet. Market share gain along with lower crude price has led to the improvement in their financial performance. Further, it would help players in gaining further market share leading to higher operating leverage as occupancy increases coupled with better passenger tariffs at competitive rates," said Ajit Mishra, Vice President, Research, Religare Broking.

While the turbulence seems to have subsided, some analysts do not see a silver lining in the exit of Jet Airways.

According to them, the benefits from Jet's demise have already played out and will no longer play a factor in the rise of Indian aviation.

"There will no doubt be less competition due to one less player in the industry but broadly speaking, whatever impact was to happen has already happened. There will not be any significant benefits to these companies in the future due to this as the capacity additions have already been captured in their current result," said Umesh Mehta, Head of Research, SAMCO Securities.

"This quarter marks the peak season due to the summer season and holidays, therefore this quarter itself would have recorded the increase. Therefore from a business standpoint, these players will not have any further major benefits now," he added.

According to Mehta, Jet's exit is actually bad news for Indian consumers as "they have now a limited choice and little bargain on the price front."

"If the industry has to evolve and become bigger, more players would be in the long-term interest of the consumers. Currently, this seems to be a distant dream. However, the DGCA has adequate control over the industry, which hopefully will not lead to profiteering thereby protecting the interest of the consumers,” he said.



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First Published on Aug 14, 2019 10:35 am
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