Those in government who are constantly looking for revival plans for loss-making PSUs—under various ‘turnaround’ specialists—would do well to look at how Air India has fared after large parts of the airline industry stopped functioning due to IndiGo grounding flights because of lack of pilots and Jet Airways coming close to shutting down. In February 2018, according to a news report in The Times of India, IndiGo had a market share of 39.9%, followed by Jet at 16.8% and Air India at 13.2%; SpiceJet was fourth with a share of 12.4%. A year later, in February 2019, IndiGo’s market share had climbed to 43.4%, SpiceJet rose from 4th position to 2nd with a 13.7% market share while Air India remained at the 3rd slot, but with a reduced market share of 12.8%; nearly 90% of the fall in Jet’s market share, to 11.4%, was grabbed by IndiGo and SpiceJet. A similar story, not surprising given the various factors constraining PSUs that no government has been able to fix, applies to telecom PSUs like MTNL and BSNL; despite so many telecom players being forced to shut down, even before the fresh RJio onslaught, both PSUs continued to lose market share.
And this is despite the thousands of crores of taxpayer bailouts these PSUs continue to get in order to protect their bloated/inefficient workforces. Worse, this access to free money has distorted the competitive environment and may even be responsible for the large losses made by private sector firms. Air India, as Bloomberg Opinon columnist David Fickling has pointed out, is a full-service carrier—like Jet Airways—but its ticket prices resemble those of a budget airline. Over the past few years, data from the Directorate General of Civil Aviation show that Jet’s passenger yields are significantly higher than IndiGo’s—as they should since the latter is a low-cost airline—but Air India’s yields aren’t very different. In 2017, for instance, Jet’s yields were Rs 4.4 per revenue passenger kilometre (RPK) versus Rs 3.7 for IndiGo (18.9% higher) and Rs 3.9 for Air India (just 5.4% higher than IndiGo); in 2014, in fact, while Jet’s yield was Rs 4.9 versus IndiGo’s Rs 4.5, that for Air India was even lower at Rs 4.3. Had Air India not got the Rs 32,809 crore it got since FY10, it would have shut down, and with overall fares rising as a result, other airlines would have done better.
23/03/19 Financial Express
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And this is despite the thousands of crores of taxpayer bailouts these PSUs continue to get in order to protect their bloated/inefficient workforces. Worse, this access to free money has distorted the competitive environment and may even be responsible for the large losses made by private sector firms. Air India, as Bloomberg Opinon columnist David Fickling has pointed out, is a full-service carrier—like Jet Airways—but its ticket prices resemble those of a budget airline. Over the past few years, data from the Directorate General of Civil Aviation show that Jet’s passenger yields are significantly higher than IndiGo’s—as they should since the latter is a low-cost airline—but Air India’s yields aren’t very different. In 2017, for instance, Jet’s yields were Rs 4.4 per revenue passenger kilometre (RPK) versus Rs 3.7 for IndiGo (18.9% higher) and Rs 3.9 for Air India (just 5.4% higher than IndiGo); in 2014, in fact, while Jet’s yield was Rs 4.9 versus IndiGo’s Rs 4.5, that for Air India was even lower at Rs 4.3. Had Air India not got the Rs 32,809 crore it got since FY10, it would have shut down, and with overall fares rising as a result, other airlines would have done better.
23/03/19 Financial Express
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