Aviation consolidation looming in India: CAPA

Sydney, Mar 8 (UNI) The Centre for Asia Pacific Aviation (CAPA) predicts a round of airline consolidation in India in the medium term as a solution to widening losses and rampant capacity growth.

''Despite the bullish traffic growth projections for India, overseas experience suggests that it is extremely difficult for a market to absorb so many new entrants, particularly in such a short space of time,'' said its CEO for Indian subcontinent and West Asia Kapil Kaul.

This is especially the case for India which is facing a number of external issues such as airport infrastructure and manpower shortages that serve to increase costs and reduce efficiency and flexibility.

These are compounded by the fact that airline management in some cases is relatively inexperienced and untested, said Mr Kaul in CAPA's Outlook 2007 report titled Dawn of a New Era.

According to the report, consolidation will occur through a process of closure or mergers/acquisitions, leaving around two to three full service carriers, three to four large national low cost carriers (operating fleets of 70-plus aircraft), and three to four niche, regional operators (with aircraft less than 80 seats).

The process will begin this year but may take time, given the overhang of foreign investment eager to enter the market.

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