India’s airline sector appears headed for another round of consolidation this year: CAPA

India's airline industry is expected to post a combined operating loss of USD two billion for the 12 months ending March 31, 2009. The financial performance of Indian carriers has been repeatedly battered since 2005 by deep discounting, the fuel price spike, slowing demand and depreciation of the Indian rupee. With red ink accumulating over the last three-four years to over USD three billion, the industry is in desperate need of restructuring. The problem: too many airlines, too few airports and passengers. India's airline sector appears headed for another round of consolidation in 2009, as carriers seek to return the industry to profitability after a turbulent couple of years. Earlier attempts have not been particularly successful. But this appears to be the only option.

But, as airlines the world over have frequently found, mergers can bring along with them large amounts of baggage. These often outweigh the more obvious - or more apparent - benefits.

The current situation
The immediate problem is that the airline market is highly fragmented, with too few routes to fly. And the train market has