Call it loss of heart. A day after India’s private airlines threatened to go on strike, they adopted a conciliatory line on Saturday. A government threat did the trick.
Illustration: Jayachandran / Mint
The plan was to suspend operations, or strike, on 18 August. Instead, the civil aviation ministry retorted by saying that the government could not be expected to help private airlines financially.
There is no doubt that India’s aviation sector is in trouble: Private airlines collectively lost $2 billion (Rs9,640 crore) in the last fiscal year. It is also true that the cost of aviation turbine fuel (ATF)—one of the highest in the world—high landing and parking charges and ground-handling charges have made matters difficult.
What cannot be ignored is the airlines’ bad business planning. The high cost structure of the industry is well known. The airlines know they operate in a high cost environment, yet this did not prevent the creation of excess capacity in the aviation sector.
This also did not prevent the financially ruinous dog-eat-dog fare cuts. These were designed to capture higher market shares for individual airlines. Thus, the combination of high costs and overcapacity has brought airlines to this pass.
Here, it is apt to add a word about the behaviour of these companies. When it comes to competition between them, they don’t mind downright poor financial practices. But when it comes to cornering benefits from the government, they gang up in an almost cartel-like fashion. This is unacceptable.
Beyond these words of condemnation, however, it is important to ask the question: What is it that makes it possible for these companies to make such demands? The fact is, civil aviation is a sector that is in a reforms limbo: Our skies have been partially opened up for private players, but the government continues to exercise control in many areas which robs the country of the benefits of private competition. Taxes on ATF are a handy source of income for badly run state governments; this, and the near monopoly of the Airports Authority of India on many services, are two examples of the problem.
In this situation, which is reminiscent more of an oligopoly than open competition, it is cheap to lobby government for securing incremental favours instead of asking for serious deregulation. The latter step will see other foreign players entering the Indian market, something that both private players and the government are mortally scared of. In this cosy world, strikes by private companies are hardly surprising.
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