Excess baggage

Mumbai: September will go down as the worst month in the labour history of India's airlines.It saw pilots of two leading carriers -- Jet Airways and Air India -- strike work for a week within 15 days of each other, inflicting revenue losses of Rs100 crore on each and leaving thousands of passengers stranded.
The labour discord was an inevitable fallout of the airlines' financial troubles which have piled up in the last two years not only due to factors like soaring fuel prices and a fall in demand due to an economic downturn, but also a business model that led to unsustainable costs.
There were plenty of excesses during the boom years -- from selling tickets below cost to aggressively adding capacity, hiring pilots at exorbitant salaries to chasing market share at the cost of profitability, the list runs long.
All this became a millstone round their necks when the economy went into a tailspin. According to the Centre for Asia Pacific Aviation, domestic airlines have accumulated losses of Rs15,000-16,000 crore in the last 3-4 years.
Interestingly, statistics released by the International Air Transport Association (IATA) show that the losses of local carriers for 2008-09 was Rs10,000 crore ($2 billion), nearly 20 per cent of the global airline industry loss estimated at $11 billion, although their share in the global aviation market was just 2 per cent.
State-run Air India's (AI) losses alone have shot up to Rs7,200 crore in the last fiscal from Rs 500-600 crore in 2005-06.
Meanwhile, private mainline carriers like Jet Airways and Kingfisher Airlines are struggling to keep their operations going by slashing excess capacity and rehauling cost structures. Jet has already snipped 30 per cent capacity in the last 12 months while Kingfisher has cut back 21.5 per cent.
04/10/09 Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General Oct 2009