Further reduction in capacity by Kingfisher Airlines has come as a blessing in disguise for the industry, which has been reeling under huge losses. This reduction is likely to increase the average load factor, currently around 75 per cent, and the yields thereby.
The average industry fares are already up to 20 per cent higher and the increasing trend picked up after Kingfisher pulled back some capacity in November.
“The average industry load is over 75 per cent, which will rise after Kingfisher cuts capacity. The capacity cut is on expected lines and the capacity will be back after things improve,” said Centre for Asia Pacific Aviation Chief Executive Officer Kapil Kaul.
The industry has seen some price correction after November, when Kingfisher curtailed operations and cut 50 flights.
An airline executive, who did not want to be identified, said the average fares were around 15 to 20 per cent higher. “The fares are 15 to 20 per cent higher, but there is a scope for more, and that may happen with Kingfisher cancelling flights,” he said.
He added there was also a concern that any increase in fares might hamper the double-digit passenger growth. “There is an elasticity effect. We cannot burden the passengers to the extent that they stop flying. The growth in volumes has been good, but we are unsure about the fare increase limit to ensure the passenger growth is not impacted,” he said.
A Delhi-based analyst said this was the time for airlines to focus on increasing yields, not just volumes. “When airlines like Jet Airways, which has seen many ups and downs, start making losses, it means there is aproblem in the industry. The airline should take this reduction in capacity and focus on increasing yields and not just passenger number. If they do not utilise the time now, their losses will continue to mount,” said an analyst who tracks the sector.
