The unexpected growth of three budget airlines – IndiGo, SpiceJet and GoAir – creates market distortion, analyses Business Insider.
According to a report published by the Centre for Asia Pacific Aviation (CAPA), the three low-cost airlines – IndiGo, SpiceJet, and GoAir – will make a record profit in FY 2019-20. Among the three, IndiGo alone will register a profit of USD 400-500 million, the report stated. Such profit is more than the last year’s combined profits of three airlines together.
IndiGo currently occupies a 49.9% market share, which is half of the market. SpiceJet has a share of 13%, nearly the same as that of the national carrier Air India. SpiceJet’s market share will rise to 25% in one year, CAPA estimated in its report. The remaining few shares go to GoAir, Air Asia, and Vistara.
While the growth of low-cost airline can be directly attributed to the fall of Jet Airways, it is interesting to note that the airlines are making these profits despite low passenger growth or occupancy rate. The passengers opting for air travel has reduced drastically. If the low-cost airlines are making such high profits from a smaller number of passengers, then the profits come from the scorching airfares.
The report by Business Insider analyzes that the IndiGo’s airfare has grown in a way that the average fare person has grown 12% in the last quarter of 2019. The number of flights occupied per flight dropped 3% year-on-year.
It is evident that with the fall of Jet Airways, other carriers raise the airfares so high that resulted in the drop f passenger traffic. The scenario has also paved for the rise of aviation stock of the listed airlines. Overall, India’s budget airlines have become more valuable than their global counterparts. The authorities seem to be ignoring the market distortion, the report concluded.
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