Nearly half of India’s airlines have gone under in the last two decades. The most recent victim to join this list is Go First Airlines, which filed for bankruptcy and immediately grounded all of its flights for May 4 and 5.
According to Boeing India President Salil Gupte, “India, in this region, is going to be the fastest-growing (aviation) market over the forecast period of 20 years.” This prediction was made a year ago.
However, as the purple alien from Titan warned, “reality is often disappointing,” as 13 airlines in India have closed in the last decade. Jet Airways and Kingfisher Airlines are just two examples of these major players.
After only five years in business, Paramount Airways went bankrupt. Air Pegasus, located in Bangalore, ceased operations a little over a year after it first took off.
Why have Indian airlines not been able to shake this curse off?
There are many factors different to all their situational aspects. From market sensitivity to price changes and expensive operations.
In contrast to low-cost carriers (LCCs), which offer cheaper fares overall but then tack on additional fees for things like checked bags and seat assignments, full-service carriers (FSCs) include all of these extras in the price of the ticket. Recently, the split has been around 80:20.
Unlike in the United States, where low-cost carriers (LCCs) generate money by selling seats on Global Distribution Systems (GDS) and via Travel agents, the rest of the world sees LCCs as profitable only when they offer tickets directly to customers through their websites.
But things are different in India, where no city even has a secondary airport, so primary and secondary designations are moot. As a result, the pricing will remain the same.
Indians are still heavily reliant on using travel agents, and airlines are having a hard time transitioning customers to using direct booking channels like their websites or mobile apps. When a commission is paid, it is because a third party, such as an agency or an app, facilitated the booking. The airline’s already slim profit margins are likely to take a hit from this.
Just one day before takeoff, plane tickets are going for pennies on the dollar. If government fees weren’t taken out of airport and airline profits, the former would get just a fraction of the latter.
However, prices on monopoly routes are increasing rapidly, and this isn’t making travelers look into other options. Obviously, something is off-kilter.
Inadequate resources and financing
Investors have been wary of the airline industry ever since the debacles of Kingfisher Airlines and Jet Airways. From the standpoint of passenger volume, the company is one of the fastest expanding, but from the perspective of profitability, it is not.
Ray of hope
Expansion of airports, subsidies for airlines flying the RCS-UDAN route, and the development of a Flight Training Organisation are just a few of the positive steps done in the recent decade.
Aviation Turbine Fuel (ATF), which is used by aircraft and is prohibitively expensive in India, consumes the vast majority of the company’s earnings. There have been no calls to include ATF in the GST system.
Where, therefore, does the answer lie? Is it ticket prices that allow airlines to make a profit? That would lead to low levels of market stimulation, expansion in the single digits, and a slight increase in passenger numbers. Nothing about this will bring India any closer to its potential as a major market. But should India sacrifice airlines to realize this lofty goal, or does the country require a framework to protect its ecosystem?