Indian Aviation Industry Struggling on the Runway of Profitablity ?

There’s a myth that the Indian Airline industry is not performing consistently. That’s not true at all! All the Indian airline companies are consistently making losses and there’s no single company that is out of this league (Except Indigo to some extent). But, how has the industry been able to maintain such consistency? What has made the industry so mundane?

Aviation turbine fuel (ATF) is one of the important sections of the industry. Indian government didn’t not reduce the jet fuel prices in proportion to the fall in international crude oil prices. But, when there is a rise in crude prices, it increases in the fuel cost would eventually increase the operation of the airline. Besides, it could compel airlines to go for an upward fare revision to offset the increased cost of operations. Why, the jet fuel accounts for 45 percent of an airline's cost of operation. For the past one year, the ATF price has witnessed an increase of nearly 30 percent and around 25 percent in just last six months.

High Airport (aeronautical) Charges levied by Airport Authority of India are higher. These charges payable at the International airports are higher than those payable at the airports designated as Domestic airports. As a result, the domestic airlines in India are incurring additional costs at the international designated airports without deriving any extra facility.

There is a cut throat competition faced by the top airline due to ticket pricing. Established Airlines are threatened by low cost carriers, which are eating up their market share. In order to consolidate their market share, top premium airlines were forced to reduce their ticket fares to around 15- 20 per cent. Such a slash down in price will lead to a price war in the long run amongst the airlines with the only goal of increasing their market share.

Overall it looks as if the Indian airlines have lost hope as well. There’s a cut-throat price war going on all the time and it’s not about gaining profitability but a mere battle of survival. Demise of Jet Airways is just recent. What shall we expect now?

India’s aviation industry has a huge potential and offers huge growth opportunities. One of the key factors which favours such a expectation is that 40 per cent is the upwardly mobile middle class are starting to prefer air travel as the prefect mode of transport. So government must engage and collaborate with industry stakeholders to implement efficient and rational decisions that would enable the growth of India’s civil aviation industry.