India’s airlines: Cruising through crises...

It has been a roller coaster ride for Indian aviation in the last few months. May 20 brought some cheer when Jet Airways was issued an Air Operators Permit to restart operations. The airline temporarily ceased operations in April 2019. About a month later, on June 21, Akasa Air, a new start up airline promoted by billionaire Rakesh Jhunjhunwala and others got the first of the 72 Boeing 737 MAX aircraft that it has ordered. The airline is to start commercial operations from August 7.

However, June and July proved to be a dampener. In a span of about three weeks, SpiceJet aircraft reported a number of technical problems and IndiGo, which controls a domestic market share of over 50%, saw its schedules disrupted when in early July its staff took mass casual leave. Over 50% of IndiGo’s flights were disrupted in a day. To add to the airline’s woes, its technicians also went on leave a few days later. While this did not affect flight schedules, it showed that everything was not right in the airline with the largest market share. As though this was not bad enough, most recently GoFirst reported two incidents with its Airbus 320 aircraft, with one being diverted and another returning to its origin.

Given the spate of incidents involving aircraft flown by domestic airlines, the Directorate General of Civil Aviation (DGCA) cracked the whip on July 18 saying airlines were improperly identifying causes of reported defects on aircraft and were not placing qualified engineers at all airports. The DGCA further said there was an “increasing trend” of Minimum Equipment List release of aircraft. DGCA has given the domestic airline industry 10 days to comply with its latest order.

What is making it worse for the sector is that there has been a seasonal decline in the average number of passengers flown by domestic airlines in July which stood at about 3.24 lakh against 3.54 lakh the previous month.

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So are these technical problems with aircraft a passing phase or should the flying public be wary of taking to the skies again?

Some good news however made industry watchers optimistic about the prospects of the aviation industry in India.

According to Jagannarayan Padmanabhan, Director and Practice Leader (Transport and Logistics), CRISIL Infrastructure Advisory, the outlook looks pretty good from a medium-term perspective (the next three to five years). “We should see healthy growth rates in the overall aviation sector, new airlines are coming up, new terminals are being built. I think from an investment perspective, close to Rs 80,000 crore or Rs 100,000 crore is being planned in the next five to six years in airports only,” Padmanabhan said, adding that what must be kept in mind is that nobody has said that they are going to call off their investments or give them a go by. “Those investments are still going uninterrupted. In that way, it points to the growth of the sector and a positive mood.”

Nripendra Singh, Global Director (Aerospace & Defence) of Frost & Sullivan, agrees, adding that the Indian aviation market will grow around 15% to 17% in the next two years owing to the lower base in 2020. “Indian aviation’s growth will outpace that in Asia-Pacific and China in the next few years which is a positive for the sector,” Singh says.

On the troubles that the industry has faced, Padmanabhan says that business always has its ups and downs, particularly when it comes to airlines. “I think every two to three years, there is always a certain churn or something unexpected happens. That's one part of it, the other one is that with the backdrop of the Covid-19 and from the human resource perspective, people had cut their operations to the right size.”

Padmanabhan is of the opinion that one impediment to growth could be the soaring price of Aviation Turbine Fuel, which is hovering at $ 100 a barrel and the depreciation of the rupee against the dollar, especially when a lot of the costs incurred by the airlines are in foreign exchange.

If analysts are to be believed then the civil aviation scenario is going to be interesting in the near future as well. According to some, Akasa Air and Jet Airways are coming up to exploit the weaknesses of the existing players. However, the new entrants too need to be watchful as infrastructure in terms of slots (a landing and a take-off sequence at airports) at the major metros like Delhi, Mumbai, Hyderabad, Bengaluru and Chennai being dominated by IndiGo and other legacy carriers. This may pose some challenges for the new players.

On the other hand, “Akasa Air and Jet Airways will have clean balance sheets which should be an asset given that the balance sheets of most existing players are deep in the red. Even those carriers which put aside funds for all sorts of contingencies will take another three to five years to recover to the 2019 levels. But it remains to be seen whether this alone will be enough to allow the survival of more new players in the Indian market,” Singh says.

With new players coming in and many being optimistic about the sector, there is a need for airlines to reskill or upskill to a certain level as technology has also got embedded into the overall scheme of things. In this context, one way that the sector can survive is if it starts focusing on skill development rather than trying to hold back its employees by paying them more salaries.

(The author is a senior freelance journalist who writes on aviation industry)