India’s airline industry is crying for help. Estimated losses this year will be around $2 billion. And civil aviation minister Praful Patel has requested the Prime Minister to move aviation turbine fuel (ATF) into the declared goods category, thus imposing uniformly low tax rates across the country.
Rising fuel prices have been eating into even otherwise slim margins. But the long-term sustainability, leave alone profitability, of many of our airlines will depend on much more than the Prime Minister’s compassion on ATF.
Illustration: Jayachandran / Mint
The Indian airline industry is finally coming to grips with reality. The growth in airline passengers actually slowed last year (to around 22%) and rising fares have somewhat cooled consumer enthusiasm for air travel.
Airlines are responding to these issues by curbing their inherent expansionary instinct: cutting down routes, paring jobs, outsourcing ground operations and deferring fleet expansion plans.
But none of these issues tackles some fundamental problems facing the business: India simply does not have the infrastructure to support a competitive yet profitable civil aviation industry with several national players.
Setting aside input costs such as fuel and manpower, low-cost airlines depend on critical on-the-ground factors that help them make money. Airports must allow planes to land, reload and take off again in as little time as possible. Tight turnaround times help airlines fly more people at lower costs: the very essence of the low-frills model.
Blaming airports for airline woes may seem convoluted. But globally, low-cost airlines have always depended on keeping their planes in the air and off the ground to make money. (Of course, planes circling Mumbai and Delhi airports waiting for runway space does not count!)
Ryanair, the global standard for a profitable low-cost airline, carried more than 50 million passengers last year and made record profits by sticking to cut-throat turnaround times of 25 minutes from landing to take-off, and by focusing on regional airports that were not choked by the mainstream carriers. Customers might rank it their least favourite airline in the world but the fact remains that even in these hard times, Ryanair turned in profits of almost half a billion pounds in 2007-2008.
Our airports have much to do before they can adequately support our low-cost airlines. And we need many more of them, too.
Do low-cost airlines have a future in India? Write to us at email@example.com