As Covid curbs recede and business and tourist travelers – cooped up for two years – find their wings, one can see air ticket prices slowly creeping up and airlines cashing in on the mad rush. There is the flip side too. A slew of airlines are hitting the skies, and will hopefully challenge the monopoly of Indigo Airlines. For the air passenger this means cheaper tickets and better connectivity.
Jet Air, which has been grounded since April 2019, is on revival track, and after its first flight in mid-May this year, has been granted an air operators permit (AOP) by the Director General of Civil Aviation (DGCA). Most industry watchers have been skeptical whether Jet would ever fly again. But after a few missteps, the new owners – Murari Lal Jalan, a Dubai-based businessman, and Florian Fritsch of Kalrock Capital – are pumping in $180 million to pay off old dues and acquire new aircraft.
Akasa Air, promoted by stock broker Rakesh Jhunjhunwala, is also sprinting to take to the air. Old Delta Airlines hand, Vinay Dube who now heads Akasa Air, expects to receive its flying permit as early as this month, and will begin selling tickets and scheduling flights soon after. Being a new airline, Akasa will have to stick to domestic routes for some time.
And finally there is the old heavyweight, Air India, whose ownership passed to the Tata Group in January this year. The group has 3 airlines in its bag now – Air India, the premium Vistara, and Air Asia – with a collective passenger share of around 24%. Air India hasn’t bought a new aircraft since 2006, and therefore its whopper order for 300 planes, is possibly a record for the industry.
Tough nut to crack
Commercial aviation has always been a tough nut to crack all over the world. In India too, the scramble by new players comes at a time when the market is already crowded and aviation fuel prices are hitting a new high.
Even market leader IndiGo, despite its near monopoly of 60% of passenger traffic in May, is still struggling. For the quarter ended March 31, 2022, its net loss widening to Rs 1,682 crore, up from Rs 1,147 crore for the same period a year ago. InterGlobe Aviation, the airline’s parent company, blamed the 61% rise in fuel prices for this negative results.
The airline business is not a very pretty picture. In the past 15 years, as many as 17 airlines have folded up; of these, two airlines Air Odisha Aviation and Deccan Charters exited in 2020 after the Covid lockdown. Air India’s debt, before it was sold to the Tata Group, had ballooned to Rs 60,000 crore.
The pandemic, which suspended air travel March 2020 onwards for nearly 18 months, took a severe toll on the industry. Airlines cumulatively reported losses of around Rs 19,500 crore while airports took a loss of more than Rs 5,120 crore. These figures should have dampened the enthusiasm of the new players; but the post-pandemic air travel rush is now being seen as a sizeable window of opportunity.
New opportunities
DGCA data for instance showed a strong recovery by May this year when air carriers flew 1.20 crore passengers on local routes, as compared to just 21 lakh passengers a year ago in May 2021. There is long-term expansion too. Over the last 3-4 years, India has become the fourth largest domestic aviation market in the world and is expected to overtake the UK to become the third-largest air passenger market by 2024. The significance is the growth of demand from smaller towns where income levels and business activity has created pressure for new airports and better air connectivity.
With Jet and Akasa Air set to take off, there will be 8 serious contenders. It looks crowded, but considering passenger demand, this is what the country needs. Vinay Dube, chief of Akasa Air says: “I don’t think India has excess supply -- India will need 1,000 planes over the next 20 years. The pie is growing faster in India,” he said.
Civil Aviation Minister Jyotiraditya Scindia remarked India needs to add as many as 120 jets every year to keep pace with demand.What is the future of some of the new airlines and those who are still struggling? Will they undercut each other by unsustainable ticket pricing to grab passenger volume? Some like Ronojoy Dutta, CEO and whole time director of Indigo Airlines, feels that many of these airlines are now headed by hard-nosed professionals who have learnt the hard way.
Passenger volume will be chased but not at the cost of business sustainability, he said in a recent interview. If Dutta turns out right, more airlines will survive and prosper, and that is what is in the interests of the community of air passengers too.
17 airlines have folded up in 15 years
The airline business is not a very pretty picture. In the past 15 years, as many as 17 airlines have folded up; of these, two airlines Air Odisha Aviation and Deccan Charters exited in 2020 after the Covid lockdown. Air India’s debt, before it was sold to the Tata Group, had ballooned to Rs 60,000 crore.