Airline Sector: A Catastrophe in the Indian Skies

Posted on June 8, 2012 in Specials

By Leons Thomas:

It’s not new to know that the Indian airlines sector has always been in the news for facing ignominy from passengers. Be it on social networking sites, newspapers, news channels; they have recently become the bone of discontentment among everyone for their poor services. More airports are being opened across the country. Air passenger traffic has been rising year after year in India. The airline industry sector continues to look promising with increasing new airline companies. But, with all things considered, none of the airlines seems to be making a profit. Conceivably, only Indigo – the low-cost, utilitarian, airline – has been able to play safe.

So what’s wrong with the airlines, or even the aviation industry in such a growth centre as India? The liberalization of the Indian aviation sector in the mid nineties resulted in significant growth due to the entry of private service airlines had seen its best but is now on verge of waning. Whatever be the factor  – be it chronic under-performance of airline companies, poor customer service and unions that consider collusive action a matter of right — the airline sector is in a soup. Is it the government to be blamed, the airline companies, the unions or the customers who are seeking too much? Each stakeholder reflects or has a share in the mess (except the customers) the airline industry is facing. When questioned about the reasons for the shambles, some airline companies claim that Aviation fuel accounts for nearly 50 per cent of the costs, and its price increase over the past two years has been substantial, eating into already low margins. Air fares have not risen correspondingly because of competition and the need to raise the load factor. There is lack of a positive, consistent aviation policy since the opening up of the private players in the Indian skies.

Unfortunately, most major airline operators in India such as Air India, Indian Airlines, Jet Airways and Kingfisher Airlines have reported large losses since 2006, due to high aviation turbine fuel (ATF) prices, rising labor costs and shortage of skilled labor, rapid fleet expansion, and intense price competition. The problem was also compounded by new players entering the industry even before the existing players could stabilize their operations. As a result of the already weak domestic scenario, the airlines suffered even further when the recession, which exacerbated all these factors. Citing the above the Indian aviation industry has been more resilient than its global counterparts. And yes how can we forget the constant strikes of pilots which ultimately lead to cancelations of flights. Poor performance by the airline staff and facilities further irks the passengers.

So what is erroneous? Is it that we have a collection of poorly managed companies, strange policies or illogical unions or their regular strikes? There are tasks cut out for everyone here. What needs to be done urgently is to restore the demand-supply balance at price levels that customers are willing to pay. The Centre’s decision to allow airlines to directly import fuel has been a welcome measure. But it is not enough and has happened belatedly. Moreover the gaps in infrastructure, high input costs, the dearth of opportunities and incentive for international tie-ups are further aggravating the present problems. These corrections have to be a collective responsibility with government taking a lead in reduction of taxes and coming up with logical, unbiased policies. The sovereign also has to ensure that it does not undermine industry structure by supporting a largely outdated company such as Air India which is on tenterhooks of the childish union of pilots. The Civil Aviation Ministry must discuss all the issues affecting the economics of the industry and also the major airlines must set their houses in order and take employees into confidence, without leaving them in the lurch.