Tuesday, May 30, 2023

Go First and beyond: Is Indian aviation going the telecom way?


The past few days have swung in a volatile manner for Go First. Things have come a long way for Go First – filing for voluntary bankruptcy, lessors seeking to repossess their planes, the airline being admitted to bankruptcy court, lessors being made to wait longer for their planes, and the carrier repeatedly postponing plans to restart operations.

With Go First out of action, airlines have started adding flights. In the case of Jet Airways, slot allocation had become a contentious issue. It was linked to capacity addition and SpiceJet and Vistara ended up taking Jet Airways’ planes from lessors. It turned out to be a win-win situation for the lessors and the airlines.

The latest reports indicate that Go First is not on the verge of starting. Contrary to earlier indications that flights would resume by the end of May, we are now in an unknown loop, one that often tends to end without a result. Historically, any airline that has suspended operations in India has never restarted.

This is also the closest that we are to fears about aviation gravitating towards a two-horse race – IndiGo commands an over 50 percent market share and airlines under the Tata umbrella have 30 percent, with the rest fragmented among other carriers.

Akasa Air is too small as of now and SpiceJet has been in a financial crunch over the past few years. The question now is how, if at all, the remaining 20 percent of the market will play out.

Aviation often gets compared to telecom, which started a golden egg-laying industry. However, a combination of self-goals, taxation, and low fares killed airlines, leaving behind only a handful, including a state-owned carrier.

Indian aviation was growing at 20 percent about a decade ago. The collapse of Jet Airways, the financial issues of SpiceJet, the pandemic, and now the Go First crisis have resulted in muted growth. Amid all this, though, there is a glimmer of hope – and that is around profitability.

30/05/2023 Ameya Joshi/Moneycontrol.com

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