#New Delhi: The aviation industry market in India is developing rapidly. And within the next 20 years, our country will be among the fastest developing countries in this field. Boeing thinks so. According to them, besides the opening of new airports, there is also a change in the financial status of people. Because people are slowly becoming middle class and upper middle class. Not only that, the infrastructure of Indian Railways has become very old. As a result, Indian airlines are going to see profits due to all these reasons.
Although Boeing has this opinion, the reality is the complete opposite. Almost all of us know that 13 airlines in India have been locked in the last two decades. This list includes major airlines like Jet Airways and Kingfisher Airlines. Not only that, small airlines like Air Carnival and Air Pegasus have also been shut down. But the list would be longer if it included the defunct cargo airlines.
Again in the beginning of 2020, the corona epidemic rampage started. Many airlines have survived the Corona situation that has been going on for almost two years. But the damage has also been done. For example, let’s say TruJet (TruJet). The company has repeatedly announced that they are going to resume their services. But it didn’t really work. Not only that, Go FIRST’s IPO has disappeared from the market since the pandemic. Apart from this, every quarter during the Corona period, instability is seen in the SpiceJet airline.
As a result, it is understood that the difference between the estimate or the prediction and the reality is wide. But why are airlines dying in India?
Poor market conditions, difficult to drive costs:
India now has a split ratio of 80:20 between Low-Cost Carriers (LCC) and Full Service Carriers (FSC). LCCs offer low-cost travel to and from affiliated airports around the world. And this is how they earn money. They avoid selling through Global Distribution System or GDS or through travel agents. Instead they sell tickets directly through their website. But a look at the aviation industry market in India shows how different the market situation is. There is no second airport in any city in the entire country. As a result the question of major and minor status does not arise. And that means, all airlines cost the same.
In India, ticket booking is still mostly done through travel agents and OTAs or online travel agents. However, airlines are always trying to ensure that passengers book through airline websites and mobile apps. Every time a booking is made through a secondary channel, a commission is payable. And as a result, the very small profit of the airline is being destroyed.
Flights on the Ahmedabad and Mumbai route are being sold for just over Rs 1,000 the day before departure. Apart from the charges that are going to the government and airport operators, the remaining 600 to 700 rupees, only the airlines can make a profit. Even in other sectors the story is similar. On the other hand, fares on exclusive routes are increasing rapidly. Due to which the passengers of those routes are forced to choose other means of transportation. Which means, the balance is completely lost.
Leasing to run costs:
In the absence of a strong balance sheet, most airlines in India have opted for asset leasing rather than outright purchase. In fact they have the advantage of both options. For example, Jet Airways used to lease its own aircraft for a period of time. Because they needed money to sustain themselves.
When IndiGo started its operations in 2006, it cost Rs 45.6 to buy one dollar. But after 16 years, the price of that one dollar has become 79.84 rupees. And for that they should have increased the fares, but since the end of the last decade they have not done much in this regard.
Access to Funding:
Experiences from Kingfisher Airlines and Jet Airways show that access to funding remains a major challenge for airlines. If we look at the number of passengers, it can be seen that the development of this industry is increasing. But from the point of view of profit, the matter will not be so positive. Because looking from that side, it can be understood that the profit was not so much.
A few things have shown some light of hope. Among them are various decisions in the last decade including formation of flight training organization, leasing set-up at GIFT City, expansion of airport and subsidized airlines for RCS-UDAN route etc.