ANALYSIS: Flat capacity growth helped Air India, Jet and SpiceJet in 2012

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Air India, Jet Airways and SpiceJet all narrowed their losses for the fiscal year 2012/13, but capacity growth data suggests that profitability will remain elusive.

Of the three carriers, Air India posted a loss of Rs52 billion ($933 million), compared with a loss of Rs75 billion in FY2011/12. Jet Airways and SpiceJet also show signs that they are moving in the right direction - Jet's net loss narrowed by 60% to Rs4.9 billion, while SpiceJet's net loss narrowed to Rs1.9 billion from over Rs6 billion.

All three carriers complained of persistently high fuel costs. Air India even said that it plans to adopt more low-cost carrier practices in order to stem its losses.

The relatively better performance of the three carriers correlates with conditions in the year 2012, in which total capacity on Indian domestic routes showed flat growth, no doubt helped by the demise of Kingfisher Airlines. This is compared with 15% average growth since 2005, when Flightglobal Capstats first started recording the data.

india 2005 share 

In 2011, when the three big carriers suffered greater losses, Capstats indicates that total domestic capacity in India amounted to 97.6 million seats, up by 18% from 2010's capacity of 82.5 million seats. In 2012, India's total domestic capacity rose just 400,000 seats to 98 million.

 india capacity 2012 (2)

A major source of India's capacity growth in recent years has been LCC IndiGo. At its inception in 2006, IndiGo provided just 1.04%, or 538,000 seats, of India's total capacity of 52 million seats that year. In 2012, IndiGo was India's dominant player, providing 26.9% of India's capacity, or 26 million seats.

Given that IndiGo is likely to keep adding capacity this year and with the expected launch of AirAsia India in the second half of 2013, the capacity growth pause seen in 2012 is likely to be temporary.

Indian carriers have shown dismal performance when faced with an environment of ever-growing capacity. FY2012/13 was relatively kind, but the dark days could return in FY2013/14 if Indian domestic capacity growth resumes its relentless climb.