The temporary grounding of Jet Airways has positively transformed market dynamics for the other Indian carriers, which could report a combined net profit of $250-700 million in FY20, the Centre for Asia Pacific Aviation (CAPA) said in a report titled ‘India Insight Q1 FY 20’, on Thursday. The best case scenario would be a profit of $500-700 million and the worst case would be $250-400 million, it added.
The exit of Jet has eased slot constraints at various airports, particularly during peak hours, and this is another positive transformation in the market, said the report. “Jet’s exit has released plentiful slots, particularly at India’s most congested airport, Mumbai, which was its base. Airport operators will need to adjust to the new growth and market realities,” the report added.
Another positive outcome of Jet’s exit is that the pilot shortage in the market has eased, with 2,100 employees of the airline now available for jobs elsewhere. Further,
Speaking to
AI may break even
The report is of the view that Air India could break even at the net level for the first time in over a decade. “The favourable market conditions represent a unique opportunity for structural reset of the national carrier, which Air India must take advantage of,” it said. Vistara may be the greatest beneficiary of the Jet shutdown, it added.
According to the report, low-cost airlines IndiGo, SpiceJet and GoAir are likely to report record profitability in FY20. They are likely to report a combined profit of $500-700 million, of which IndiGo alone could account for $400-500 million, it added.
The report further said most of the domestic capacity lost as a result of Jet’s closure should be restored by the end of the second quarter, with growth resuming subsequently. Domestic traffic growth, however, will be muted with full-year growth expected to be below 5 per cent. “The high double-digit growth rate observed during the last five years is unlikely to return for the foreseeable future,” it added.
SpiceJet’s ascent
SpiceJet is emerging as the Number 2 player in the market and, within 12 months, its domestic share could approach 25 per cent, the report said.
However, according to the report, recovery in the international sector could take one or two years with traffic likely to be flat. The report also predicts that consolidation in the Indian market will continue. “Jet Airways’ exit is the first step with further developments likely over the next 12-24 months,” it said.