Monday, January 9, 2012

Airlines In India An Industry In Crisis

I am not an expert on Indian aviation but I have learnt a lot following Bangalore Aviation. Two news items attracted my attention last week;

The first is Star Alliance asking Air India again to join and BA initiating procedures for Kingfisher to join
Oneworld. Considering that both airlines are financial disasters only shows the importance of the Indian market
to airline alliances. This is not surprising considering the growth rate of the Indian economy in the last few
years. The Indian economy is slowing down but it is still growing at a respectable 7% annually.

The second is the report of the DG of the Civil Aviation Authority on the state of Kingfisher and his statement that there is a reasonable case for withdrawing their AOC. Also sited in the report for safety problems are Air India Express, Indigo, SpiceJet, GoAir, Jet Airways and JetLite. In essence this is an indication of failed government policies.

The government has failed to date, to resolve the financial problems of Air India. Air India is operating at levels well below its costs while resisting all efforts of restructuring while still incurring high losses. Air India has been offering low fares driving the competition. Further, the government has failed to improve the aviation infrastructure to meet the demand of a more affluent middle class for air travel, in spite of the high taxes levied on tickets.

What is most worrying is when the top regulator in the country cites almost all the airlines in India of a "patchy track record on passenger safety"; this begs the question of the level of safety oversight the DGCA has been exercising on a day to day basis.

It is great that the CEOs of Kingfisher and Air India Express and indeed all the other CEOs to be hauled in front  of the DG to be admonished for their failings and to explain their recovery plans. What is needed is for the DGCA to step up the oversight over the airlines and for the government to resolve the issue of Air India.

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