By Jitender Bhargava
Indian aviation is going through a turbulent phase, albeit an interesting one, because history seems to be repeating itself. In an unprecedented move, all existing airlines of India, under the banner of Federation of Indian Airlines (FIA), have joined hands to seek a denial of licence to Air Asia India for operating in Indian skies.
In a letter sent to the Prime Minister, they have averred that FDI policy allowing foreign airlines to acquire a stake in Indian carriers was applicable to only existing, not new, airlines; that DGCA has not examined the issue of substantial ownership and effective control being vested in the Indian partner with regard to Air Asia India.
Whether these arguments have merit or not, it reflects the psyche and fears of Indian carriers. In the past two decades, one finds that when private airlines were being given operating permits and Air India and Indian Airlines were vehemently protesting, the opposition was summarily dismissed by stating that competition is good, passengers will have a wider choice, air travel will become cheaper, etc.
Also, the government couldn’t be seen hindering growth solely to protect the "inefficient" state-owned airlines. Private airlines with greater professionalism and higher efficiency levels naturally enjoyed an edge over government airlines accustomed to operating in a monopoly environment, high costs and surplus manpower, besides blatant political interference.
Ironically, the same disadvantages (and political patronage instead of interference) will be faced by these private airlines when Air Asia India and Tata Singapore Airlines, being operationally and technologically superior due to their international partnerships, commence operations.
What was advocated as justifiable evolution of the industry then is not being regarded so now, hence the protest. One may tend to concur on the threat perception, but for entirely different reasons. One doesn’t need to be a financial wizard to aver that a debutant airline with lesser debt and no cumulative loss will be able to play in the highly price-sensitive Indian market more aggressively than airlines having their balance sheets dyed in red.
The 2005-10 period showed that all airlines in their quest to garner market share offered ridiculously low fares. In subsequent years, market forces never allowed airlines to hike fares as any increase saw a resultant dip in market growth.
Result: all airlines with the exception of IndiGo have huge debt and mounting losses. When it finally became an issue of survival for some airlines, the government was forced to relax its policy on FDI in September 2012 by permitting foreign airlines to acquire a stake. It was only the collapse of Kingfisher Airlines in October 2012 and a resultant drop in capacity that allowed airlines to register higher occupancy on flights and command enhanced fares.
The fact that airlines even at current fare levels are struggling to break even warrants attention. Now, if we fast forward the situation post the entry of two new airlines, one can assume the situation for existing Indian carriers will worsen.
It can be argued that if an airline does get to meet the Kingfisher fate, why shed tears: after all, the passengers will "gain" through cheaper travel. But is this wise thinking?
An airline going bust not only hurts India’s global standing but banks lose money lent to the airline, employees lose jobs and travel becomes costlier. While existing airlines have protested by advancing technical arguments instead of mustering courage to tell the government they feel threatened by airlines that have accomplished globally, ground realities also can’t be overlooked.
If the entry of private airlines without professionalising Air India and Indian Airlines hurts the two airlines, must we repeat the mistake of allowing every new airline to edge out previous operators even as conditions are made congenial for efficient business — like the proposed change in the 5/20 rule for international flying?
So, a more comprehensive view needs to be taken before operating permits are granted lest we find our domestic market being swallowed by international airlines with not-so-dominant Indian partners, quite like what we witnessed with Gulf airlines becoming our national carriers for international flying.
(The writer is former executive director, Air India)
Indian aviation is going through a turbulent phase, albeit an interesting one, because history seems to be repeating itself. In an unprecedented move, all existing airlines of India, under the banner of Federation of Indian Airlines (FIA), have joined hands to seek a denial of licence to Air Asia India for operating in Indian skies.
In a letter sent to the Prime Minister, they have averred that FDI policy allowing foreign airlines to acquire a stake in Indian carriers was applicable to only existing, not new, airlines; that DGCA has not examined the issue of substantial ownership and effective control being vested in the Indian partner with regard to Air Asia India.
Whether these arguments have merit or not, it reflects the psyche and fears of Indian carriers. In the past two decades, one finds that when private airlines were being given operating permits and Air India and Indian Airlines were vehemently protesting, the opposition was summarily dismissed by stating that competition is good, passengers will have a wider choice, air travel will become cheaper, etc.
Also, the government couldn’t be seen hindering growth solely to protect the "inefficient" state-owned airlines. Private airlines with greater professionalism and higher efficiency levels naturally enjoyed an edge over government airlines accustomed to operating in a monopoly environment, high costs and surplus manpower, besides blatant political interference.
Ironically, the same disadvantages (and political patronage instead of interference) will be faced by these private airlines when Air Asia India and Tata Singapore Airlines, being operationally and technologically superior due to their international partnerships, commence operations.
What was advocated as justifiable evolution of the industry then is not being regarded so now, hence the protest. One may tend to concur on the threat perception, but for entirely different reasons. One doesn’t need to be a financial wizard to aver that a debutant airline with lesser debt and no cumulative loss will be able to play in the highly price-sensitive Indian market more aggressively than airlines having their balance sheets dyed in red.
The 2005-10 period showed that all airlines in their quest to garner market share offered ridiculously low fares. In subsequent years, market forces never allowed airlines to hike fares as any increase saw a resultant dip in market growth.
Result: all airlines with the exception of IndiGo have huge debt and mounting losses. When it finally became an issue of survival for some airlines, the government was forced to relax its policy on FDI in September 2012 by permitting foreign airlines to acquire a stake. It was only the collapse of Kingfisher Airlines in October 2012 and a resultant drop in capacity that allowed airlines to register higher occupancy on flights and command enhanced fares.
The fact that airlines even at current fare levels are struggling to break even warrants attention. Now, if we fast forward the situation post the entry of two new airlines, one can assume the situation for existing Indian carriers will worsen.
It can be argued that if an airline does get to meet the Kingfisher fate, why shed tears: after all, the passengers will "gain" through cheaper travel. But is this wise thinking?
An airline going bust not only hurts India’s global standing but banks lose money lent to the airline, employees lose jobs and travel becomes costlier. While existing airlines have protested by advancing technical arguments instead of mustering courage to tell the government they feel threatened by airlines that have accomplished globally, ground realities also can’t be overlooked.
If the entry of private airlines without professionalising Air India and Indian Airlines hurts the two airlines, must we repeat the mistake of allowing every new airline to edge out previous operators even as conditions are made congenial for efficient business — like the proposed change in the 5/20 rule for international flying?
So, a more comprehensive view needs to be taken before operating permits are granted lest we find our domestic market being swallowed by international airlines with not-so-dominant Indian partners, quite like what we witnessed with Gulf airlines becoming our national carriers for international flying.
(The writer is former executive director, Air India)
