The Prevailing Scenario in the Aviation Industry is a Classic Case of Missed Opportunities!

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  • Over the years, the aviation industry has emerged as the most preferred mode of travel for millions despite the economic meltdown witnessed courtesy of a variety of challenges. What hitherto used to be considered a privilege reserved for the affluent lot, the opening up of the aviation sector by inviting different players has made the mode accessible to even the poor due to affordable rates. It also reflects how expendable income has steadily risen, allowing people from lower strata of society to opt for the quickest mode of travel. As the sector started witnessing a boom, expectedly, a slew of challenges too came to the fore in no time, including the extremely competent airlines’ making all-out efforts to garner the lucrative pie on offer.

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  • Few airlines commenced operations with lots of fanfare, hope, promises, and potential to carve out a niche but eventually started finding it hard to sustain the business model on the back of sector-related challenges. Several successful business conglomerates and entities also tried their hand at positioning themselves in the aviation sector. As is the case with any sector, not many could make it count, and a few known entities like Kingfisher Airlines and Jet Airways were forced to wind up operations eventually. We are all aware of how flamboyant but now-wanted Vijay Mallya, who at the time rocked the business, first publicized Kingfisher Airlines. Similar is the case with a well-established airline like Jet Airways winding up abruptly after years of quality service.
  • Most disturbingly, Go Airlines has now jolted India’s aviation market during its peak season by announcing on May 2nd that it has used the bankruptcy code to approach the National Company Law Tribunal. The airline has resorted to voluntary insolvency, which means that it can still operate once the process is over. However, for the time being, India’s aviation market is going to have a vacuum. Go Air’s market share in February was 8%. Inevitably, already high airfares will rise further. That, however, shouldn’t result in regulatory intervention to cap fares. Such a move would be counterproductive. Needless to mention, this development has come at a time when Indian domestic aviation is almost back to its pre-pandemic level.

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  • The passenger traffic in January-February was 24.6 million, marginally lower than the traffic of 25.1 million during the same period in 2020. With Go Air out of the picture right now, the domestic aviation market has a duopolistic character. As reported, market leader IndiGo has a 56% share, while the different airlines controlled by Tatas together have about 26% of the market. India’s aviation market, the world’s third largest, is growing fast, and it needs more competition. Of course, aviation is characterized by a low-profit margin and high fixed costs. India can ill-afford a market with inadequate competition. Catalyzing new entrants with a policy framework for furthering the aviation ecosystem should be prioritized, including competitive fares.