Airlines should save themselves
22 August 2009
The problems of the Indian airline industry are all their own making, the result of excess capacity and faulty business models. They don't deserve any government support. By Shivshanker Verma
Many may still recall Vijay Mallya's swagger when he launched Kingfisher Airlines, in February 2005 (See: High on Kingfisher). With characteristic panache, he promised a completely different experience in the air with brand new planes, attractive cabin crew and premium service all the way. There would be special handlers to assist guests, not passengers mind you, check in at airports.
The food served on board would be nothing short of a gourmet experience and Mallya's only regret was that he couldn't serve his beer on board.
One among the overawed journalists at the press conference somehow managed to regain enough composure to ask Mallya whether he expected to make any money out of this business. Absolutely, we expect to be cash positive in no more than a year, came the reply. Several years later, the airline is so deep in red it will take at least a decade of profitability to erase the accumulated losses. Even Mallya's bravado is now a distant memory.
It is not just Kingfisher, every full service airline and some low-price carriers are bleeding. Jet Airways was once touted as a potential challenger to top global airlines like Singapore Airlines and its successful IPO made founder Naresh Goyal a billionaire for a few years. His airline is now busy cutting back on international routes and leasing out its new planes to other carriers to survive.
A few years back, the IAS sahibs heading Air India vowed to reinstate the national carrier to its former glory. Since the airline's supposedly glory days happened several decades back, which nobody remembers and very few would associate Air India with anything resembling good service, even modest improvements would have been enough to validate the pledge. Unfortunately, Air India is now desperately seeking a government bailout without which it will soon drop out of the sky.
The Indian airline industry is said to have lost close to Rs10,000 crore during the last financial year. If the first quarter results of Jet and Kingfisher are any indication, this year will be no different and could even be worse if oil prices go up again. Why is this sector, which until recently was seen as a sunrise sector with immense growth potential, in such a sorry state now?