KPMG:Domestic Air Traffic to double by 2012

In spite of skyrocketing operational costs, a slump in global aviation business and rising airfare research firm KPMG is buoyant about India’s airlines business. Its latest report says that the domestic passenger will double by 2012. KPMG believes that traffic is likely to be in the range of 24.2— 31.3 crore in 2012, up from the existing 11.6 crore. Till 2004, India only handled 4.8 crore passengers.Economic growth, a rise in income levels and growing spending power of middle class will fuel this growth.The Indian aviation sector is registering the highest growth in the world with passenger traffic growing at a 25 per cent CAGR a year. In contrast, world air traffic is growing only at 5 per cent and even in the US, it is only about 7-12 per cent,” says Mark Martin, senior advisor at KPMG. Industry estimates however peg India’s growth rate for 2008 at 8 per cent.
The research firm says it is not possible for any domestic airline to make profits within the first three years of starting operations. This is not only due to the ATF price hikes, but also influenced by capex towards new aircraft, maintenance, and support among others. The average airline break is even based on prevalent capital expenditure, which typically occurs in a minimum of five to seven years of operations.During the April to March (2007-08) period, international passenger traffic in India grew 15 per cent while domestic passenger traffic was up 23.8 per cent. But a Jet Airways official says, “Dipping load factors on short haul flights due to rising airfare could impact the growth rate as these flights act as feeder to long hauls and account for sizeable traffic.” Interestingly, the growth has been lead by Tier II and Tier III airports.
Traffic data from Airport Authority of India reports that Bhubaneshwar grew 99.9 per cent, Jaipur 90.7, Raipur 68.6, Tiruchirapalli 65.9 and Ranchi 67.6.
Even with international traffic smaller cities score over metros. Mangalore tops the chart with a whopping 381.4 per cent growth followed by Coimbatore at 255 per cent.