What Ails Aviation Sector
In News: India’s biggest full-service carrier Jet Airways Ltd has told its pilots the airline may be grounded in 60 days unless cost-cutting measures including pay cuts are put in place.
- The company was looking at sales and distribution, payroll, maintenance and other areas for savings to create a “healthier and a more resilient business”. Jet Airways is looking for working capital loans but banks want the airline to show a turnaround commitment.
- Surging fuel prices and a weaker rupee are hurting Indian airlines, with the country’s leading carrier IndiGo reporting a 97 percent plunge in profit on Monday.
- Jet Airways agreed last month to purchase 75 Boeing Co 737 MAX aircraft to meet domestic passenger demand, taking its total order for the wide-body planes to 225.
- India is the 3rd largest and the fastest growing domestic aviation market in the world in terms of number of domestic tickets sold.
- In 2016-17, annual growth in domestic passenger departures was 23.5 per cent as compared to 3.3 per cent in the US and 10.7 per cent in China
- During the 2007-08 to 2016-17 period, domestic passenger traffic registered a compound annual growth rate (CAGR) of 9.89 per cent.
What’s holding back the Indian aviation sector?
Rising fuel prices and the depreciating rupee: Oil for the airline industry is an important variable cost. As the price for oil has shot up, it had led to difficulties for airlines as they have not been able to absorb in the short term due to their business model.
Airlines’ inability to balance volume and value: The suffering for the sector is not a new one altogether. Over time, checks and balances should have been built in the system to absorb price shocks. The sector is confused as a whole on whether they want more volume or should they concentrate on a feasible plan that will help them keep their house in order.
India’s airlines have been trying so hard to capture market share that they’ve lost focus on making money. Indian aviation companies have been unable to value sustainability over volumes.
Inability to come up with a currency policy: No airlines company has been able to devise a credible currency policy to protect them against sharp currency movements.
The Way Ahead
- Aviation sector should have been better prepared to handle such an unforeseen situation, learning from the past situations – as fuel prices and rupee volatility were among the top reasons for one of the biggest aviation disasters of recent times (the shutdown of Vijay Mallya-owned Kingfisher Airlines in 2012).
- A clear long-term policy roadmap which is aligned to the industry’s requirements is yet to emerge. One method could be opening up international routes faster for our airlines that are successful.
- The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2025.
Above all, the industry experts and the government should be mindful of the fact that India’s aviation industry is largely untapped with huge growth opportunities, considering that air transport is still expensive for majority of the country’s population, of which nearly 40 per cent is the upwardly mobile middle class. Time has come to step up the aviation game!
Connecting the Dots
- What are the highlights of the new civil aviation policy? Why was this policy the needed? Discuss.
- India has witnessed tremendous growth in the civil aviation sector recently. What according to you is the significance of small airports and budget airlines for the economy? Examine.
- An industry-led initiative coordinated by the Ministry of Civil Aviation in line with the Digital India vision to transform the nation into a digitally empowered society
- Aims to transform the flying experience for passengers and position Indian Aviation amongst the most innovative aviation networks in the world
- The passenger will have choice to opt for the facility.
Key features are:
- Digitize air-travel experience: Use of digital technology for enhanced and seamless passenger experience all the way from ticket booking to airport entry check, security check and aircraft boarding
- Single-point verification: Passengers enrol in to DigiYatra program through AirSewa, and a DigiYatra verified passenger gets hassle free entry at airport through E-Gates. The ID verification will be done by the BCAS-approved Government ID. At the entry gate a single token for the passenger is created.
- Value-added services: like ground transportation, special services at airport, in-flight, etc. and many other value added services for passengers in future will also be delivered through the DigiYatra programme.
- Enhanced security: The programme also enhances security while providing convenience to the passenger
- Technical Standards formulated: Ministry of Civil Aviation has finalized the technical standards for DigiYatra which will be published shortly. Airports such as Bangalore, Hyderabad, Kolkata, Varanasi and Vijayawada will roll out this programme in phases by January 2019.
AirSewa app: AirSewa app brings together all the stakeholders on a common platform to ensure timely and effective handling of customer grievances and to disseminate real-time data.