As Kingfisher Airlines Ltd loses its right to fly, it is tempting to cast off its departure as comeuppance. After all, its flamboyant owner Vijay Mallya flouted every rule in the cost-control manual, exerted unusual influence with lending agencies to get cheap and frequent loans and hasn’t paid his staff for months. Fair enough, one would surmise; he had it coming.
But there is also a deeply disturbing undercurrent in the sight of one more private airline in India being confined to the hangars. In its lap dance with the structural problems in India’s aviation sector, every private airline has come to grief. It’s a trend that began with the six private airlines—Damania Airways, Skyline NEPC, Modiluft, East West, Gujarat Airways and Span Air—that started operations post 1992 following the first round of deregulation of the sector. All perished in the first five years of that brave new world.
Post 2000, another set of entrepreneurs, wizened by the failure of their predecessors, came with a new set of offerings. The most successful among them was Kingfisher Airlines. When it was set up in 2005, Kingfisher held out the promise of comfortable travel, with passengers even in the “cattle class” being treated well for the high fares they were paying.
Its capitulation, along with the steep losses of all the other airlines barring Indigo, would seem to suggest there is a structural problem in the way the sector is organized. While Mallya has been accused of trying to use his political clout to influence aviation policy in his favour, the aviation business in India hasn’t been a model of perfect competition. The airlines apart, all other players along the supply chain enjoy some form of monopoly. The airport operators, the oil marketing companies, each one is a monopoly supplier. The ones left holding the can are the airlines, which must pay high fuel costs inflated by surging oil prices, steep government levies and equally high airport fees. When the airlines seek to pass these levies on to the consumer, the backlash is all theirs to handle.
At this point, of the various airlines operating in India, only Indigo is profitable. Were all the airlines to go the way of Damania and Modiluft and Kingfisher, the results would be catastrophic for India’s travelling public. National carrier Air India Ltd hasn’t made a profit in five years and is surviving mainly on government handouts, a situation that could well continue. With every inch of space that private airlines yield, the government-controlled monopoly could be the big gainer.
For those of us old enough to remember the dark days of government-controlled flying, the long waits at the airport, persistent delays and horrendous airline service are too horrifying to contemplate returning to now.
The moribund state-controlled and monopolized Indian railway system has shown virtually no progress over the past many decades. When the Rajdhani Express first started in the late ‘70s, it would take about 18 hours to cover the 1,500 km distance between Calcutta and Delhi. Over 30 years later, the journey takes the same time, the experience is, if anything, worse, and with no new options in all these years, the struggle for a ticket at a short notice is still an ordeal. The number of accidents caused directly and indirectly by a misfiring rail network is evidence of how shoddily this sector has been managed.
There is a huge economic cost to an inefficient airline sector of the kind that India had till the 1990s. According to a 2011 report by the US department of transport, The Economic Impact of Civil Aviation on the US Economy, civil aviation, accounting for 5.2% of its economy, significantly catalyzes and facilitates all sectors of trade and business.
Researchers Mariya A. Ishutkina and R. John Hansman of the MIT International Center for Air Transportation in their 2009 model, Analysis of the Interaction between Air Transportation and Economic Activity: A Worldwide Perspective, say the value of passenger destination services and transported goods makes up part of enabled impacts or enabled flows. This increase induces a feedback effect whereby the increase in “economic activity in turn provides capital and generates the need for passenger travel and freight, which drives the demand for air transportation services.”
While few tears will be shed if Kingfisher doesn’t take to the skies again, the space vacated by it must be filled by other competitive private players and not taken up by a thoroughly inefficient state enterprise living off the largesse of the tax payer. Unfortunately, that’s not likely to happen till the structural flaws in the sector are fixed.