ND: Airline industry runs into turbulence

New Delhi, May 21: Emergency landings, chronic delays and huge financial losses continue to infect the country's airline industry that has grown at breakneck speed in recent years.

There is a quantum increase in passenger numbers, formation of new airlines by entrepreneurs, ready financing from banks and aggressive sales campaigns by aircraft manufacturers Boeing and Airbus.

But the industry remains financially sick and many airlines struggle to meet day-to-day expenses even as they order more planes.

Outdated airports stagger under the crush of passengers and flights.

Kingfisher Airlines that began operating two years ago has ordered five of the world's largest plane the Airbus A380 and has options for five more despite the fact that it has not yet made a profit.

Optimists, including many entrepreneurs who are backing the airlines, repeat a familiar mantra: growth will take care of problems.

India's increasing links with global businesses mean there is plenty of room for a multitude of carriers as passenger traffic surges from 60 million (35 million domestic and 25 million international) in 2006-07 to 100 million by 2010.

Airbus spokesman David Velupillai says what drives air travel is economic growth, pointing out that India and China are the fastest growing economies in the world. ''We've consistently underestimated what the total Indian market will be.''

But just three people in the country per 100 travel by air annually compared with 10 per 100 in China. Given the size of India, lifting that low figure to just six will mean plenty of traffic. Considering the industry's current state, fulfilling those rosy predictions could take some work. Competition is so cut-throat that carriers lose 10 to 15 dollars (about Rs 500) a passenger per flight, according to the Center for Asia Pacific Aviation (CAPA).

Maintenance crews and airports are stretched to their limits as new passengers take advantage of super-cheap flights. The industry is losing half a billion dollars (over Rs 2,000 crore) a year.

So far, emergencies have been minor like a collapsed nose-wheel on an Air India plane that left it tipped on a runway last month. No one is suggesting that airlines are unsafe to fly. But the industry is unsustainable as it is, say critics.

''The entire industry is operating with fares below their costs,'' said Mr Kapil Kaul, who heads the CAPA's operations in India and surrounding region. ''Mergers, acquisitions and liquidations are necessary.'' A shakeout in the airline industry may already be under way but it is not happening fast. After months of negotiations, Air Sahara agreed to a takeover by Jet Airways in April.

Government-owned Air India and Indian have started integrating after the merger. The process is likely to linger on for two years.

Air Deccan, the first low-cost airline, has been searching for an investor that might include a partnership with Kingfisher, bankers and analysts say, though Air Deccan denies that there are any plans to link up.

UNI