Sure, its not like we are going to be walking out of our houses for a while, let alone pack up our bags and travel to a whole new destination. But when that does happen, do we know which airlines wed be likely to pick?
Even before Coronavirus wreaked havoc, the Indian airlines industry has been on shaky grounds. For some time now, the aviation sector of the country has always managed to stay in the news, in one way or the other. What’s with this sudden plethora of issues targeting this sector, from internal disputes to bankruptcy? In February 2020, a report of as many as 12 airlines going bust in the last 21 years hit the country, just adding fuel to its economic chaos.
As stated in a recent report by the Economic Times, India currently stands proud as the world’s third largest domestic and civil aviation market, which is estimated to reach 800 aircrafts by 2020. One of the country’s largest online booking platforms, MakeMyTrip, in its quaterly estimates, anticipates a staggering 242% increase in commercial passengers. In a nutshell, India is a priority developing economy which is expected to see a boom in most sectors and aviation is not an exception.
However, ever since SpiceJet declared emergency around 4 years ago, major market shareholders have been facing mammoth difficulties too. The airline made headlines when it grounded 1600 flights due to termination of oil refuelling contracts as a consequence of unpaid dues. However, years after Founder Ajay Singh sold off his company, the story of SpiceJet came as nothing less than that of a Phoenix, it basically rose from ashes. From taking charge back to ensuring smooth functioning of all expected passenger services, SpiceJet today released quarterly profits amounting to Rs. 356 crore and a 176% increase in share prices with Singh restated with all his former glory. The key feature that was focused on was trust, reshaping the airline’s routes, performance tracking etc. which helped SpiceJet’s very dramatic comeback.
The scene wasn’t exactly the same for another major airline, Jet Airways. India’s largest shareholder in its recent past, Jet’s sudden collapse took the country by storm. 16,000 jobs were lost, airfare went up and everyone waited eagerly to see how Jet returns, if it all it does. From a change of the Board of Directors to auctioning of Jet planes, the fall of the company was nothing but drastic. Like any other major fall, there were plenty of reasons to account for the same too. Overdue payments, debt summing up to Rs. 8000 crores ,volatile oil prices, greater than sustainable discounts offered, inability to compete with other market dominators and many more contributed to the Jet crumble. One of the biggest reasons of its failure can also be traced back to its $500 million purchase of Sahara in April 2006 when financial experts advises against it. And now after its request for emergency funding being denied, the glimmer of hope that Jet will come back doesn’t shine as brightly.
Furthermore, Vijay Mallyas Kingfisher seemed to shake citizens faith in their most trusted airlines, a sort of panic quite similar to the crumbling NBFC sector India faced not very long after. Air India continues to wait quite long to be sold off after accumulating debts over tens of years, which being the National airline is not great news for the country.
Even now, as Indigo stands tall as one of India’s biggest market shareholders, recent news broke out of ongoing internal disputes between the co-owners, accusing each other of malpractice and inexperienced decisions. The Ganghwal-Bhatia dispute over Related Party Transactions (RTP) have shaken investor confidence as Indigo’s share prices continue to drop. The disagreement went on to include reasonable doubt regarding staff accommodation, where Bhatia maintains that IGE’s (Novotel hotels) contribution to Indigo’ accommodation was a less than sufficient 8% when compared to Accor (Ibis group of hotels), as reported by the Economic Times. Although not as a major as the other two, a crisis is still I crisis.
Air India too, how can one forget, has been dragging itself all the way as it continues to get emergency funding from the Government of India to continue its operations. The Aviation Minister Hardeep Puri recently disclosed an overwhelming foreign interest in the purchase of Air India, talks of which have never been made concrete. Another point to ponder here is Indigo being one of the first airlines to introduce steep pay cuts after the Coronavirus broke out.
As the country’s own brands collapse, it’s an open market for companies looking for expansion abroad. An emerging presence of foreign companies including Tata-Singapore Airlines owned Vistara and Istanbul based Turkish Airlines has been realized as Vistara moved in quite swiftly to introduce domestic flights, beginning from IGI Airport, New Delhi. But, foreign airlines should not be filling up the spaces created for the countrys very own, domestic airlines.
Indeed, India’s possible recession coupled up with its constant aviation crisis seems to make up for costlier holiday plans now, with no clear direction as to where the stability of the country’s aviation sector is headed. Perhaps, as a policy suggestion, this sector in particular needs to get more support among other priorities after things start returning to normal.
Riya Mathur is currently a student of Economics at the Shri Ram College of Commerce
The views expressed in this article are solely those of the author and may not necessarily reflect Qrius Editorial Policy