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Indian airlines have more empty seats these days but their profits are soaring like never before-- and no one seems to care

Indian airlines have more empty seats these days but their profits are soaring like never before-- and no one seems to care

Sriram Iyer

IndiGo, Spicejet, and GoAir are making the most out of the grounding of Jet Airways.
Reduced competition allows the airlines to charge high fares despite fewer passengers.
Stock market investors lapping up shares of IndiGo and SpiceJet.

The Indian airline sector is controlled by three 'low-cost' airlines-- IndiGo, SpiceJet, and GoAir. The three companies are expected to post record profits in the year ending March 2020, according to a latest report, despite falling passenger traffic. The irony has been brought to life by the scorching airfares.

The Centre for Asia Pacific Aviation (CAPA) has estimated an annual profit of $400 million-500 million for IndiGo alone-- that is more than the profits last year for all three airlines put together. Within 12 months, SpiceJet's domestic market share could approach 25%, CAPA reportedly said.

SpiceJet currently has 13% market share as much as the state-owned Air India, while IndiGo already controls half the market, leaving the rest for GoAir, Vistara, and Air Asia.

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For instance, in the case of IndiGo, the average fare person grew 12% in the fourth quarter of 2019 whereas the number of seats occupied per flight fell 3%, compared to the same period a year earlier.

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These low-cost airlines have benefited from the disappearance of Jet Airways flights from the skies. Once the full-service carrier got grounded, the likes of IndiGo, SpiceJet, and GoAir were quick to raise airfares so high that the number of passengers opting for flights came down.

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This has also led to spectacular rise in the stock prices of the listed airlines as investors look for a share in the quick buck made by other airlines after Jet spiralled to the ground. Today, India's low-cost airlines are more valuable than all their global peers.

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The mad buying rush in airline stocks has led a global investment bank to issue a warning. HSBC has said that the consensus earnings forecast have risen too much ignoring some of the other industry risks.

Everyone, except the government and the competition regulator, seems to have taken note of the market distortion.

SEE ALSO:
The crises at Boeing and Jet Airways has brought India's air traffic growth to a grinding halt

Indian airlines have more empty seats these days but their profits are soaring like never before-- and no one seems to care

Sriram Iyer

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