India Economy

Performing rope tricks in the air

Anand Kalyanaraman | Updated on December 29, 2012 Published on December 29, 2012

Strikes, shutdowns, continuing losses, slowing passenger growth — Indian aviation’s litany of troubles in 2012 stretched long.

Yet, the stocks of Jet Airways and SpiceJet zoomed 230 per cent and 165 per cent this year. Even the down-and-struggling Kingfisher Airlines has gained 41 per cent on the bourses since mid-September. What explains the optimism? One, the creative destruction caused by Kingfisher’s gradual exit from the skies and the protracted strike in Air India helped.

Reduced capacity gave other airlines the much-awaited legroom to raise fares — by as much as 50 per cent in some cases.

This, along with moderation in fuel cost and strengthening of the rupee (both of which proved temporary), helped carriers contain losses. Some even posted profits in the June quarter. Next, the Government’s policy push to aid the sector, though belated, boosted sentiment.

Airlines were permitted to directly import fuel to avoid high taxes.

Also, foreign airlines were allowed to invest up to 49 per cent in Indian carriers.

These magic bullets are yet to be consumed by the airlines. But hope springs eternal.

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