Indian Aviation Industry has been one of the fastest-growing aviation industries in the world with private airlines accounting for more than 75% of the domestic aviation market. Despite this marvelous growth, the industry is currently in its most precarious phase.
The industry recorded passenger traffic of 308.75 million in 2018 with a growth of 16.52% and grew at a CAGR of 12.72% during FY06-FY18. Though 2019 seems to be a year of sharp U-turn for the industry with the industry being in dire of recapitalization currently.
The most visible event would be the indefinite suspension of Jet Airways, once India’s biggest airline by passenger count. Though this might be the most critical case the industry is facing, it is by no means the only one.
Jet Airways has at least Rs.15000 Crore in dues while Air India has debt worth up to Rs.9000 Crore to pay up. Still, Capital crunch just forms the tip of the iceberg to the long list of the industry’s woes.
Jet fuels mark 40% of the total cost of an Indian carrier. A fraction of change in fuel prices in sync with the already low-price market can affect the profitability of the airlines in a major way. Airlines are already witnessing a decrease in profit and are slowing drifting closer to potential losses.
In addition, India is also one of the most expensive countries for jet fuel due to extremely high tax rates. Airlines’ constant appeal to the government for a reduction in taxes are all in vain. The Indian government has been directing its efforts towards smaller airports lately but the policies do not favor efficient airline operation in such a price-sensitive environment. Government’s failure to address key issues and minimum understanding of the sector weakens the backbone of the industry.
Uncertain technical glitches have also been itching the industry lately. Constant delays in solving these issues or delays in deliveries of orders by airlines impact the industry to manage the ever-increasing passenger count. This leads to an increase in airfares which means India offering the cheapest air travel might actually be on temporary terms.
Meanwhile, historical problems of pilot shortage still continue to haunt the industry. The gap between crew and fleet continues to widen, leading to higher dependence on expats, which still may not be able to plug the gap entirely. Airlines are already cutting down flights due to pilot shortage and are in urgent need of experienced staff to man their planes.
The industry is clearly looking at difficult times ahead. With one airline in the shadows, others still continue to fight to still keep the industry profitable. Government actions and policies in the right direction just might help the industry to live up to its past glory with the passengers enjoying the low price bonanza again but it is definitely sometime before that happens.
