National carrier? 0.16% of Indians fly Air India

Amidst the Air India (AI) bailout controversy, comes its announcement that it is thinking small. AI’s immediate target is to shift 54 of its domestic flights into low cost services, increasing this number to about 150 in the near future. Are they on the right track this time? To answer this question, we need to start from the principles of government help for distressed large corporations.
Three reasons are usually given to prevent the sudden demise of a large corporation. They are that: (i) it could lead to the collapse of an essential infrastructure or (ii) it provides some essential services that are not provided by anyone else or (iii) it directly affects the lives of many people. Let us go through each one of them. AI has 16% market share while the other five players have the rest. Therefore, it would be hard to envisage that the airlines industry would collapse if AI is wound up since unlike in the case of a bank failure, there is no contagion effect in this industry. Second, apart from Jamnagar, there is not a single town that AI has reached where the private players have not. In fact, as on May 2009, both Kingfisher and Jet Airways operate across more domestic destinations than AI. It is doubtful that the collapse of AI would mean that Jamnagar, the ‘oil capital’ of India, will not be served by private airlines.
Finally, how many lives will be affected if AI closes? The annual estimated numbers of passengers who travel by various airlines in India constitute less than 4% of the total population. Given the share of AI in passenger travel, the percentage of people who travel by AI is less than 0.64%. These are the number of passenger trips and not the number of passengers who travelled. If we assume that on an average an individual takes two round trips a year amounting to four trips a year, this would mean that the maximum number of individuals who travel by AI is less than 0.16% of the total population. And, these are people who can travel in other carriers should they not have access to AI. The other group of people who will be affected is AI’s 31,000 employees. However, it is the associated costs with this huge number that have contributed significantly towards AI’s losses.
14/08/09 Bappaditya Mukhopadhyay /Financial Express

To Read the News in full at Source, Click the Headline

Categories: Indian Aviation- In General Aug 2009