Story of Indian Aviation Sector: Growth Without Profit

Aviation

NEW DELHI.

Aviation In India, an overview.

In the year 2018, nearly 140 million people flew within the country. This is 18.6% more than 2017’s domestic flyer figure of 117 million.
In the holiday season, December 2018, nearly 130 million people flew within the country. This is the highest-ever number of domestic air travelers in a month.

Irony.

While India witnessed the highest air travel growth globally, at least two of its big airlines — Air India and Jet Airways — are on the verge of collapse. Other airlines are struggling to survive and are deep in the red. Aviation infrastructure in India is still not up to the mark. IndiGo with its market share going up to 41.5% for the whole year, leaves Jet and Air India way behind. Both were distant number two and three in domestic market share at 15.5% and 12.7%, respectively.
The three listed Indian carriers — Jet Airways, IndiGo and SpiceJet — lost @ Rs 200 million per day in April-September, 2018 period. Collectively, Indian Airlines are set to lose over Rs 88,000 million in FY 2019. These are the analysis done by the rating agency ICRA.
In January 2019, the International Air Transport Association (IATA) said: “India’s domestic traffic rose 13.3% in November compared to November 2017, marking the 51st consecutive month of double-digit domestic growth. However, it was also the slowest increase in 16 months.

Thus, the irony is – Indian aviation sector is a peculiar case of growth without profit.

The crisis.

The reasons for Indian airlines’ failures have generally been attributed to factors like ATF prices (being among the highest in India globally), currency fluctuations, increasing operating costs and infrastructure shortage.

Another irony is that all such factors are ‘man-made’. The crisis in Indian aviation could have been avoided.

Also Read: With Cost of Interest on the Debt, Air India Can Never be in Profit: Suresh Prabhu

The government of the day did not ever give Indian Aviation any relief by rationalising taxation on fuel. The Airlines have regularly been demanding that for more than 15 years. In response, on the contrary, the government increased excise on ATF from 8 to 14% in 2016. When it reduced it to 11% in 2018, an irrevocable damage had already been done. Then, the aviation minister categorically stated ‘mind your own business’ to the companies; the government won’t interfere.

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The Indian carriers, on their part, did not maintain a pricing discipline among themselves to ensure that the fares cover the basic cost of operations at least. Rather, they indulge in air-fare war. As a result, today most of them have weak balance sheets are just trying to avoid shutting down. However, the airlines did try to hike fares to escape Kingfisher-like fate, but the demand diminished. This suggests that aviation’s image is still that of an elitist mode of transport in India. This is another irony.

Source: http://ncairways.co/aviation/indian-airlines-still-bleeding/