June 13, 2018 TnH Global 0

Airlines in India spread their wings to escape airfare war at home

Indian airlines are turning to the international market in search of better returns as the intensifying fight for a bigger share of the world’s fastest growing domestic market – where price is king – drives down profits.

While global airlines’ profits have been strong since 2015 – though with wide regional variations – Indian carriers are struggling to remain profitable, despite filling nearly 90 percent of their seats and benefiting from a more than doubling of domestic passenger numbers over the last four years.

“It is an incredibly tough domestic market, very price sensitive,” said Stephen Barnes, chief financial officer of Singapore Airlines, which operates an Indian carrier, Vistara, in a joint venture with the Tata Group.

“Commanding a premium for a premium product is hard to do. From our perspective we invested in order to see the business grow internationally. If you look at the results of Indian airlines their performance is better internationally.”

Promotions such as $50 one-way tickets on the two-hour flight from Mumbai to Delhi are easy to find and, with airlines expected to take delivery of more than 500 aircraft over the next five years, pressure on fares and profits is increasing.

India is one of the cheapest domestic airline markets in the world, with an average fare of 13 cents per kilometre flown, according to data from travel firm Rome2Rio, less than half the 27 cents per km average in China and the United States.

Airlines including Vistara, SpiceJet Ltd and InterGlobe Aviation Ltd’s IndiGo are in talks to buy or lease wide-body aircraft as they firm up international growth plans to boost profitability.