'Budget airlines must focus on profit for funds'

India's low-cost carriers must focus on profitability in order to attract funding, says Centre for Asia Pacific Aviation (CAPA).

"India's new entrant carriers are presented with enormous opportunities, but they must focus on profitability from day one", says CAPA's Managing Director Peter Harbison says.

Saying that India's aviation market has to meet some major challenges before it gets onto the runway of rapid growth, Harbison points out that "only the most focused and efficient operators will attract the level of funding required to survive what is likely to a brutally competitive 12 months ahead".

"Investors are presented with myriad options in the Indian aviation sector, with planned listings by Indian Airlines, Air India, Air Deccan and Kingfisher Airways over the next 12 months and a host of start-up carriers seeking launch funding. SpiceJet only last week secured additional financing from foreign investors," he said.

CAPA also predicts that the Indian aviation market will see seven or eight new carriers taking off in the next one year.

"Since April this year, four new Indian carriers have entered the market and seven or eight more will take off by this time next year. All carriers are hungry for capital. India's start-ups will not only be competing for passengers, but also for investment dollars," he said.

According to CAPA, other challenges that the Indian carriers will face are increase in fuel prices and cost of operation and constraints at the Indian airports.

"With fuel prices near record levels and staff shortages also raising costs, all carriers will be under pressure to perform. Infrastructure constraints at India's airports also pose challenges for the sector; some airports will be big winners from the new growth, but there is a great need for new infrastructure investment too," said Harbison.

"Two of the top 30 most profitable airlines worldwide are based in India "" one is a full service carrier, Jet Airways, and the other is a freight operator, Blue Dart Express.

India's start-ups would be wise to follow the lead of Ryanair in Europe, GOL in South America, Southwest Airlines in the US and AirAsia in the Asia Pacific region, all of which achieve consistently good profit margins through an obsession with cost control and efficient operations," said Harbison.

CAPA's prediction comes ahead the Second Annual Indian Subcontinent Low-Cost Airline Symposium in Mumbai organised by the aviation consultant. AirAsia's CEO Tony Fernandes will be speaking at the upcoming symposium, along with CEOs from many of the region's low cost airlines and start-ups.