Jet Airways is a victim of poor policy and an insensitive governance.
Last week 22000 educated citizens have lost their jobs. They are pleading with the Government for support and I hope they get it.
Why is the pioneer airline brand of India with years of experience facing BANKRUPTCY? Jet had over 15% market share and still it failed.
Indigo, the largest airline brand had posted a 97% fall in profits in the 1st quarter of FY18-19. In the 2nd quarter, it made a loss of Rs. 652 crores for the first time after it became a listed company in 2015.
Even Spicejet made a loss of Rs. 389.40 crores in the same quarter when it had made a profit of Rs 105.30 crores in the same quarter, previous year.
Go Air is on sale after 13 years of operations! Vistara is also losing money every quarter to the tune of over 400 crores.
Interestingly, top line revenues are growing for all these airlines. Total income is increasing but expenses are increasing without control.
Aviation Turbine Fuel costs comprise 35-40% of the operating costs and fuel prices are increasing uncontrollably. The Govt has reduced excise duty by 300 basis points which is grossly inadequate.
The engine rentals and maintenance costs are paid in dollars and they comprise 30-35% of the expense. Dollar had touched all time high of over 73 plus - a rise of 13%. This affects profitability very critically. Also, airport charges for airline is very high.
Sadly, both these costs are beyond the control of the airline brands. When a brand can't control 2/3rd of its expenses in any meaning way, the risk of business is just too high.
Lastly, with the Indian economy in doldrums, the competition for excess supply, lower personal income, need to maintain the passenger load factor, and aggregators selling tickets bring down the ticket prices. When the strategic need is to increase ticket prices, the prices actually fall. There is limited ability to pass on costs increase by increasing ticket prices.
This typical scenario makes the airline industry in India dependent on the present day Government, its policies, its subsidies and its macro economic policies.
Airlines like public Railways provide critical stimulus to the economy and its growth prospects. It makes the movement of costly intellectual labour faster. Movement of Labour, like Capital directly affects the economy. It makes skills accessible across the country in great speed. It has the potential to remove poverty, cause development, improve implementation in a big country like India.
However, the Government shows a tendency to portray airline as a luxury travel mode. The aviation policy, tax rules, charge slabs therefore are not the talk of the town for policy makers and Government.
How can we make airlines less dependent on foreign exchange fluctuations? Can the Government subsidize economy travel for overall progress? Can the Government create infrastructure to maintain aircraft engines and other such services to the airline industry? How do we tackle the ATF price issue strategically? Can the Government regulate the price for the sake of faster movement of Labour?
It is no joke that all the airlines are making losses, and we hardly know who is the aviation minister. The current minister is Mr. Suresh Prabhu, who is actually the industry minister with additional charges in the aviation ministry. He took charge when TDP had quit NDA. One Mr Ashok Gajapathi Raju was the minister from 2014 to 2018. Did anyone know?
I firmly believe that aviation needs Government focus as a key strategic objective. We need to wake up to that fact and stop considering flying to be an activity of the rich.. It's not.
Last week 22000 educated citizens have lost their jobs. They are pleading with the Government for support and I hope they get it.
Why is the pioneer airline brand of India with years of experience facing BANKRUPTCY? Jet had over 15% market share and still it failed.
Indigo, the largest airline brand had posted a 97% fall in profits in the 1st quarter of FY18-19. In the 2nd quarter, it made a loss of Rs. 652 crores for the first time after it became a listed company in 2015.
Even Spicejet made a loss of Rs. 389.40 crores in the same quarter when it had made a profit of Rs 105.30 crores in the same quarter, previous year.
Go Air is on sale after 13 years of operations! Vistara is also losing money every quarter to the tune of over 400 crores.
Interestingly, top line revenues are growing for all these airlines. Total income is increasing but expenses are increasing without control.
Aviation Turbine Fuel costs comprise 35-40% of the operating costs and fuel prices are increasing uncontrollably. The Govt has reduced excise duty by 300 basis points which is grossly inadequate.
The engine rentals and maintenance costs are paid in dollars and they comprise 30-35% of the expense. Dollar had touched all time high of over 73 plus - a rise of 13%. This affects profitability very critically. Also, airport charges for airline is very high.
Sadly, both these costs are beyond the control of the airline brands. When a brand can't control 2/3rd of its expenses in any meaning way, the risk of business is just too high.
Lastly, with the Indian economy in doldrums, the competition for excess supply, lower personal income, need to maintain the passenger load factor, and aggregators selling tickets bring down the ticket prices. When the strategic need is to increase ticket prices, the prices actually fall. There is limited ability to pass on costs increase by increasing ticket prices.
This typical scenario makes the airline industry in India dependent on the present day Government, its policies, its subsidies and its macro economic policies.
Airlines like public Railways provide critical stimulus to the economy and its growth prospects. It makes the movement of costly intellectual labour faster. Movement of Labour, like Capital directly affects the economy. It makes skills accessible across the country in great speed. It has the potential to remove poverty, cause development, improve implementation in a big country like India.
However, the Government shows a tendency to portray airline as a luxury travel mode. The aviation policy, tax rules, charge slabs therefore are not the talk of the town for policy makers and Government.
How can we make airlines less dependent on foreign exchange fluctuations? Can the Government subsidize economy travel for overall progress? Can the Government create infrastructure to maintain aircraft engines and other such services to the airline industry? How do we tackle the ATF price issue strategically? Can the Government regulate the price for the sake of faster movement of Labour?
It is no joke that all the airlines are making losses, and we hardly know who is the aviation minister. The current minister is Mr. Suresh Prabhu, who is actually the industry minister with additional charges in the aviation ministry. He took charge when TDP had quit NDA. One Mr Ashok Gajapathi Raju was the minister from 2014 to 2018. Did anyone know?
I firmly believe that aviation needs Government focus as a key strategic objective. We need to wake up to that fact and stop considering flying to be an activity of the rich.. It's not.
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