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It's season for Indian airlines to make money

November 30, 2018 21:59 IST

Airlines are now pushing up fares and hopes to improve margins over the next three months to make up for the poor September quarter, even if it leads to a slight fall in their passenger load factor.

A hike in air fares, along with the addition of fresh capacity, has dented the passenger load factor (PLF) for many airlines in October - the first month of the peak season for the aviation industry.

However, airlines are not complaining. In the September quarter, airlines were not able to raise fares despite a rise in fuel prices, which dented their bottom line.

 

But they are now pushing up fares and hopes to improve margins over the next three months to make up for the poor September quarter, even if it leads to a slight fall in their PLF.

The drop in PLF is across the board, for both low-cost carriers (LCCs) and full-service airlines.

Among LCCs, GoAir saw its PLF drop 6.5 per cent in October over the previous month, while that of SpiceJet was down 2 per cent, shows the data from the Directorate General of Civil Aviation.

Among full service airlines, Vistara was at the top with its PLF coming down by 5.2 per cent, while that of Jet Airways reduced 3.3 per cent.

The overall PLF of the industry did not drop substantially, primarily on account of IndiGo holding on to its PLF in October and showing marginal improvement.

However, there are positive indications and a drop in PLF does not matter.

Yatra.com’s chief operating officer Sharat Dhall said that according to their data, average air fare yield for airlines in October rose 18 per cent over the previous month.

Encouraged by this trend, more flights were put in the air - departures went up by 6 per cent over September.

Airlines also said this trend could be welcome.

“Revenue in the peak season is more yield-driven than load-driven. Given October is the start of the peak season, the premium on pricing often leads to loads dropping slightly, while yields improve,” said a Vistara spokesperson.

A GoAir spokesperson pointed out that the lower PLF was because the festive season of Diwali - when there is a spike in traffic - was in November this year and not October like last year.

The spokesperson pointed out that both PLF and fares were firming up in November.

Data from Yatra.com confirms the trend. The data shows they have risen 4-5 per cent over October this month, which will translate into a substantial improvement in airline margins.

“Fuel prices are also softening, so we hope to get benefit out of that. We expect that at least in the next quarter, we will be in the black and make up for a poor September quarter,” said a senior executive of an Indian airline.

Photograph: Reuters

Surajeet Das Gupta in New Delhi
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