New airlines coming into India’s aviation market should not translate into predatory pricing. Rather than “crazy pricings” it was time to repair balance sheets, especially for existing players, who have suffered huge Covid-induced losses, and also for the industry that has been hit by north-bound aviation fuel prices, IndiGo’s CEO, Ronojoy Dutta said.
Dutta, while speaking at the post result earnings call said, new entrants like Akasa Air (backed by billionaire investor Rakesh Jhunjhunwala) and Jet Airways (under the new promoters Jalan-Kalrock consortium) have already got seasoned people on board.
“The industry has been behaving quite rationally. We do have a lot of players already and everybody realises that with fuel doing what it is doing, the large losses that we have incurred (by existing players), we all need to repair balance sheets. I am hopeful that the new players — who are seasoned players if you look at the management teams of both Akasa and Jet — that rational behaviour will continue and we won’t see any crazy pricing walls or anything like that,” he said.
While Jet Airways is expected to being commercial operations in the July-September quarter, Akasa has also set a timeline to start commercial operations sometime this year.
According to Dutta, high aviation fuel prices and a weakening rupee have both come as concerns for the industry in recent times. Hikes in ticket prices, would have a negative impact on demand. For IndiGo, fuel prices were higher by 72 per cent in FY22 versus the previous fiscal.
“Generally investors look at above and below the line. We try to remain profitable above the line. But, if the rupee keeps going as it is going then we begin mark to market corrections and we take a big hit below the line. So as the rupee depreciates further you can expect mark to market corrections,” he said.
International and corporate travel
International profitability will be stronger than domestic, Dutta said, adding that in the short-term there are some issues with international travel with the economic crises in Sri Lanka and China being absolutely closed.
“Overall our projection is international will be growing faster and in five years from now, it will be 40 per cent of our system. The rate of growth will also depend on our markets opening up individually,” he added.
Dutta also pointed out that India is “surrounded by international hubs” that are well connected to international traffic. There was a strong demand for charter flights to these hub, especially when these could be done either through “one stop” or non-stop. So the airlines were “quite hungry for new aircraft too”.
Meanwhile, corporate bookings are back to pre-Covid levels. Corporate travel had taken a hit during Covid but “is coming back”.