As airlines slip on oil, it's boom time for railways

DROPPING DEMAND: With demand dropping airlines are looking at reducing capacity.

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New Delhi: After doubling passenger traffic since 2004, the Aviation Industry is seeing negative growth for the first time.

Carriers have to survive with jet fuel that is about 35 per cent more expensive than in most other countries. The increase in ATF prices have seen air fares go up by over Rs 1,000 since May and passengers are slowly moving away.

April last year saw a growth of over 36 per cent. This year it dropped to about 9.7 per cent. May saw a further drop from over 35 per cent to just about 6 per cent. In June passenger traffic grew 38.3 per cent.

This year industry says even an optimistic figure will be between 2-3 per cent. July 2007, which saw a whooping 41 per cent growth, is all set to post negative growth in 2008.

Meanwhile, the loss of the airlines is the gain of the railways. According to initial railway estimates, train bookings are up by over 20 per cent. Analysts say short haul flights have suffered with passengers opting for road and rail.

With demand dropping airlines are looking at reducing capacity. Flights to smaller towns will be first to go.

SpiceJet CEO, Siddhanta Sharma says, "We will reduce capacity on short haul flights."

According to industry figures, market leaders Kingfisher and Air Deccan as well as Jet Airways and JetLite are losing RS 7-8 crore every month. Low cost carriers Indigo, SpiceJet and GoAir are losing about Rs 1 crore each month due to the high fuel costs.

In a desperate bid to save money, airlines could also cut down staff by 20 per cent.

Airlines like Jet are not going to renew contracts of expensive foreign pilots and hiring is already on hold. But with fuel prices on fire, this will not be enough say experts.