Will India’s airlines recover from the tailspin?

We have been repeatedly told that aviation in India is shining. The growth rate is exponential and it will be in the region of 400 per cent by 2020. We shall have 500 airports matching the best in the world, we were told. Now, the euphoria has disappeared and we are all left wondering if the civil aviation sector in India will revive.
Indian aviation has been in the descent phase for the last few years. Everything — load factors, yield, performance, credibility, safety and the share values of all the airlines — is declining. Airline-owners who boasted of “stand-up bars” and covering the route structures all over the world descended to the “low-cost concept” that they had frowned on just a couple of years ago.
The collapse of the banking system worldwide and the recession have brought these airlines down to reality.
The Jet Airways Chairman, Mr Naresh Goyal, had made two significant statements at the company’s 13th Annual General Meeting on September 27, 2005. He said that the low-cost model is not viable in India as more than two-thirds of an airline’s operating expenditure — including fuel, landing and navigation charges, lease charges and maintenance costs — is not dependent on the business model. He had also said that various estimates suggest that the break-even load factors for some of the new entrants in the domestic aviation sector could be in excess of 85 per cent.
On July 16, 2007, at the 32nd anniversary summit of US-India Business Council, Mr Goyal said: “Jet Airways has always made money. In the last 14 years when everybody was losing money, Jet Airways was the only airline that made money. So we will definitely continue to make money and are certain customers have confidence in us. They know we will deliver.”
In July 2008, during the Farnborough Air Show in the UK, Mr Vijay Mallya, Chairman of Kingfisher Airlines, said: “We have huge cash-flows. If it means seeing Kingfisher through turbulent times, we will. Kingfisher is not as vulnerable as other Indian airlines.”
Now, Jetlite, Jet Konnect and, from the Kingfisher stable, its Red variety, are projected to get their respective airlines out of the red. The load factors, in spite of tickets being sold at far less than optimum, are bordering on the high side, near 70 per cent. Either the airlines’ projections were inflated to boost market value or they are all going down “suicide lane” again.
The decline in health can be attributed to these extremely bloated growth projections and overcapacity build-up in the country. It appears that unless some sanity in thinking appears, the airlines are not going to pull out of this nosedive.
03/08/09 A. Ranganathan/The Hindu

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Categories: Indian Aviation- In General Aug 2009