23-05-2012, 05:41 PM
The Indian Aviation Industry:
Woes of The Indian Aviation Industry.pdf (Size: 276.27 KB / Downloads: 53)
The Jet pilots listened with disbelief. Sure, they all knew that Jet was losing money. But the
airline had continued to hire more expensive expatriate and SpiceJet pilots. They were hoping
to wrest a salary hike from the management, but Kardassis was suggesting the opposite.
In the Ministry of Civil Aviation in New Delhi, senior bureaucrats were trying to figure out if
there was a way out of the sludge that the entire sector is in. The director general of civil
aviation, Bharat Bhushan, was trying to figure out how many slots Kingfisher was using and
how many it was cancelling, and whether the airline was carrying out the required safety
checks before flying. Financial crunch or not, safety remains core.
The bureaucrats have other worries too. Air India, the national carrier, is virtually a “basket
case”, with losses several times higher than Jet’s and KFA’s put together. It needs huge
infusions of cash from the government to keep flying.
A Lousy Business
Aviation is a tough business globally. Margins are low and only the most-efficient make any
money. This year, with global crude prices rising, even some of the profitable airlines of last
year are expecting to make losses. The International Air Transport Association (IATA)
recently revised its profit numbers for the year downwards.
But in India, it is a nightmare. Overcapacity, poor management and bizarre competition have
led to a situation where almost no airline can hope to make money consistently. And few can
Empty Coffers
Industry sources — those employed by KFA rivals as well as its vendors — say that the
airline was on cash-and-carry for most items. Moreover, with rising fuel prices, what the
airline earned daily kept falling and its losses mounted. Finally, KFA found that it just could
Foreign Support
One of the things Mallya wants is foreign airline equity to be permitted in airlines flying in
India. He has been exhorting the government to allow this for a couple of years now. Go Air
is supposed to hold similar views. But not everyone is convinced that this will help KFA.
First, points out one airline boss, why would a foreign airline want to take 25 per cent stake in
any Indian airline given that it will not give the investor any substantial say in the running of
the company. More importantly, even if a bigger stake is allowed, why would anyone choose
Kingfisher with its accumulated losses and debt when there are better targets available?
“Wouldn’t I choose the airline where I see a best fit and the highest returns?” says an analyst,
arguing that Mallya’s hard work may actually benefit his rivals more.
not afford to keep its planes flying.
hope to make money at all.
The King Has Company
Mallya could take solace from the fact that his two biggest rivals — Jet Airways and Air
India also have their own set of woes. Jet insiders feel that their airline has expanded faster
than was warranted.
With half-year losses at Rs 1,000 crore, debts of Rs 14,000 crore and a “confused model” (Jet
Airways, JetKonnect and JetLite), fans of Jet in the Mumbai’s financial circles are fast
dwindling. Jet’s biggest mistake since inception — its buy-out of Sahara Airlines —
continues to be a thorn by its side. JetLite’s losses exceed those of Jet Airways.