India's domestic carriers face losses

A boy plays as an Indian Airlines plane taxes towards takeoff in the background at Mumbai airport in India.

TEXT OF STORY

Bill Radke: Bad news for the travel industry. USA Today quotes an airline analyst this morning predicting U.S. air travel will continue to decline next year.

One of the fastest-growing markets for plane travel has been India, but as Raymond Thibodeaux reports from New Delhi, it's not just the recession that's hurting airlines there.


Female announcer: Passengers are requested to proceed to boarding at gate number one. This is the final departure call.

Raymond Thibodeaux: As their flights are called, passengers at Indira Gandhi International Airport race from the check-in counters to the security lines. There are thousands of travelers here. But only a tiny percentage of Indians are rich enough to travel by air. Even so, as India's prosperity surged in recent years, analysts say so has the country's $14-billion-a-year air industry.

KAPIL KAUL: In the last four or five years we saw growth -- the domestic market growing by 200 percent; the international market growing by about 100 percent.

Kapil Kaul is chief analyst for the Center for Asia Pacific Aviation. He says in the last four years, India's carriers went on hiring sprees. They also ordered about 400 jetliners from Boeing and Airbus. Kaul says the airline companies face steep jet-fuel taxes imposed by India's state governments, and when oil prices shot up last year they took another hit.

KAUL: That started impacting each and every airline. To make matters worse, the financial meltdown almost exhausted any chances these airlines had of raising capital. Most of them have huge debts and huge interest payment obligations.

The airlines tried raising fares, but abandoned that idea when demand plummeted. Indian carriers looked for other fixes. Some merged with bigger rivals. Some have tried to slash employee rolls. And some are delaying or even canceling plane orders. India's swankiest airlines, Kingfisher and Jet Airways are known for pampering their passengers with scented welcome towels and gourmet meals, but even they are switching to a low-cost, no-frills model.

That's been a bonanza for Indian travelers with airfares dropping maybe too low, says Ajay Prakash, director for the Travel Agents Federation of India.

PRAKASH: A Bombay to Delhi fare is selling at half the price it was selling last year. The public got used to thinking that they could fly for next to nothing. It's good while it lasts, but it won't last forever. One of these airlines is going to fold up, and be assured that the rest of them are going to jack their fares up.

They'll need to. Analysts say India's domestic carriers stand to lose about $2.5 billion this year.

In New Delhi, I'm Raymond Thibodeaux for Marketplace.

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