Indian Aviation: Industry Drowning

Context:

The owners of Go First declaring bankruptcy is part of a well-known aviation story in India: of grave flaws in the industry.

Points to Ponder:

  • The article discusses Go First, an Indian airline owned by the Wadia Group, declaring insolvency recently. Several other airlines, including Damania Airways, Kingfisher Airlines, and Jet Airways, have also met with similar demises in the past, the author notes, making this, not the first airline to fail in India.
  • The Ministry of Civil Aviation and its oversight body, the Directorate General of Civil Aviation (DGCA), are held solely accountable by the author for these shortcomings. The author contends that these organisations have significant shortcomings when it comes to overseeing oversight audits to evaluate the financial stability of airlines, preventing exaggerated growth estimates for the aviation industry, and maintaining the safety and financial security of airlines.
  • According to the report, crony capitalism and a lack of accountability have made it possible for preferred airline owners and promoters to avoid scrutiny and continue receiving bank financing even when they are underperforming. Kingfisher companies and Jet Airways’ audits by the DGCA revealed the severe financial strain, however, these assessments were disregarded and the companies carried on until their eventual demise.
  • The author doubts if projected numbers and actual numbers have ever coincided, as well as the absence of due diligence and cross-checks in media reporting of statistics and numbers provided by airlines. The article also inquires as to why, when compared to other nations, India pays the highest lease fees for aircraft.
  • The author advises that the DGCA audit the finances of all Indian airlines and then disclose the results. Red flags should have been raised by the number of aeroplanes that have been abandoned in Indian airports as well as the number of accidents and serious occurrences, but they weren’t.
  • The article makes the case that accountability and openness are desperately needed in Indian aviation, not only from airline owners and promoters but also from the Ministry of Civil Aviation, the DGCA, and other relevant officials. The author contends that India’s civil aviation legislation needs a full overhaul, including a bar on failed airline executives assuming managerial positions with other airlines and a requirement that airlines maintain a corpus fund to cover debts owed to staff and customers in the event of airline closures.
  • According to the article’s conclusion, Go First is just the most recent in a long series of unsuccessful Indian airlines, and another well-liked and sustainably-funded airline is probably about to go under as well. To avoid this and guarantee responsibility and openness in the industry, India’s civil aviation policy needs to be revised.

Way forward

  • Government Support: By granting loans, tax rebates, and other incentives, the Indian government can financially support the aviation sector. This can aid airlines in surviving the current economic crisis and subsequently recovering.
  • Accept New Business Models: Airlines can think about new business models including cargo operations, providing private passengers with chartered aircraft, and expanding into allied sectors like tourism and hospitality.
  • Regional airport expansion is one area where the Indian government could concentrate to ease traffic at major airports and improve accessibility for a wider range of people. With these expansions, new airline companies will have the chance to grow their businesses.
  • High Operating cost: The single highest expense for an operator is gasoline for aircraft. It represents over 35% of total costs. For instance, for Indigo Airlines’ quarter that concluded in December 2021, fuel costs represented 35% of all expenditures (and 35% of revenue).
  • Government and the airline sector can collaborate on a solution, such as a subsidy or a new, more environmentally friendly fuel option.

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