Understanding India's Aviation Crisis Paradox : Why the sector is facing crisis inspite of a phenomenal growth?
Air transport is vital for any country. It promotes trade, tourism and generates employment. It boosts connectivity to the hinterland where reaching by land is difficult and time consuming.
Aviation sector is one of the fastest growing sectors in India with a combined annual growth rate of 16% for the past one decade and India has become the third largest domestic aviation market in the world. Passenger traffic in India stood at 316 million during financial year 2018-19.
Government launched the much famed UDAAN ( Udey Desh ka AAm Nagrik) regional connectivity scheme in 2017, which envisaged to make air travel affordable to the common man and connecting the unserved areas to boost connectivity.
In spite of the phenomenal growth the sector is in crisis for quite some time. Kingfisher airlines shut down in 2012 due to high debts and recently the Jet airways closed its operations. In this article, we are going to examine why this is happening.
The story of Jet Airways
Jet was launched in 1993 and by 1996-97 it had a 20% share in the market just behind Indian airlines and by 2010, it became the largest airline in India.
The troubles started in 2013 with the entry of budget carriers like Indigo and Spicejet in the market and the competition rose. To maintain the market, fares became competitive while operational costs increased substantially.
These budget carriers offered no extra service like on-board meal or entertainment while Jet offered mostly for free bearing losses and with time the debt kept rising.
In March, 2019 Jet grounded fourth of its aircraft due to unpaid leases. On 5th April, Indian oil Corporation stopped supplying fuel to the airlines and on 17th April all flight operations were suspended. The company had a total of 16000 employees whose source of livelihood is on the question.
Now the bankruptcy case of Jet is in the National company law tribunal (NCLT) for a debt of $1.2 billion when the lender consortium could not agree on a revival plan.
India’s largest carrier Indigo was in trouble recently when it had to cancel hundreds of flights, the reason being shortage of crew especially pilots.
Issues with the aviation sector
1. Thin profits
The sector has expanded many fold with presence of budget carriers and foreign airlines the competition is tough and profits small.
2. Shortage of pilots
India’s expanding airways need 17000 pilots in next 10 years against the current strength of only 7963. There is serious shortage of quality pilot training centres in the country.
3. Fuel Prices
It is no hidden fact that fuel costs are highest in India then anywhere else. Government heavily relies on the taxes imposed on fuel for its revenues.
4. Unstable foreign exchange
25-30% payments are made in $, when the rupee falls against the dollar the payments rise accordingly.
5. Excessive parking and landing charges.
5. Excessive parking and landing charges.
6. Shortage of aircrafts.
7. Frequent cancellations and delays, falling customer confidence.
Conclusion
There has been a rising demand to bring aviation fuel under GST which will significantly bring fuel bill down. The government should address the concerns of the industry in order to not to hamper the growth. It is projected that by 2024 India will become the third largest aviation market in the world fuelling the growth story of India.
Hello Reader! I am Tanishq Saxena, a mechanical engineer currently preparing for civil services. I passionately follow issues which are relevant to India . I wish to work in the social sector hoping to bring a change in the lives of ordinary Indians. I love to cook food & stories and keep myself fit.
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