The capacity of the domestic aviation industry is likely to rise by 13-14 per cent over the next two years, if beleaguered carrier Kingfisher Airlines continues to operate its existing curtailed fleet, an HSBC report said.
"Our capacity forecasts suggest that if Kingfisher continues to operate its current fleet, domestic industry capacity is expected to rise by 13-14 per cent over the next two years," said the report 'Indian Aviation - Back on the radar screen' by HSBC Global Research.
It added that significant cutback in domestic capacity by Kingfisher has brought about some capacity rationalisation in the industry and a better demand-supply balance.
Kingfisher's capacity is roughly down to 30 per cent of its full scale operations. It is currently flying 20 aircrafts.
Further, the report pointed out airlines have increased fares by 12 per cent towards the end of March and are mulling another 8 per cent increase.
"These signs are promising in our view. Given these developments and the need to protect against rising risk aversion to aviation lending, airlines need to move revenues in line with costs and improve cash flows. This discipline, along with a gradually declining fuel price, will likely drive airlines' earnings recovery," HSBC said.
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