Help yourself, please!

The persistent turmoil in the aviation sector coupled with the mounting losses quarter after quarter (all thanks to the increasing input costs) have left Indian aviators high and dry. Moreover, all the major players, which include Kingfisher Airlines, Jet Airways and Air India, are also over burdened with huge debts mounting over them. While, Kingfisher Airlines has a debt of about Rs.90 billion, Jet Airways has a massive burden of about Rs.150 billion on its back. Well, the less we talk about Air India’s financial standing, the better it is! All these financial obstacles have forced the domestic players to urge the Civil Aviation Ministry to relax the FDI investment cap from the current 49%. However, a pertinent question that arises is, will this proposed increase in foreign investment in the sector actually solve all the problems of the airlines? “Airlines need to ensure that they match capacity with demand. There are currently too many airlines, with too many seats, chasing too few passengers. This will require more effective management as well as consolidation in the form of mergers and market exits,” suggests Binit Somaia, Regional Director, CAPA. Surely, apart from foreign investment, the airlines should also look at route rationalisation and cost cutting as effective measures to overcome the crunch. Somaia also highlights the role of the government in pulling the players out of the quicksand as he says: “The government’s key role is to provide a regulatory framework that provides certainty to investors, which is currently missing in the aviation sector.” Thus, it is not only the financial support that is required, but also the various aforesaid measures that must be adopted by the bleeding airlines to help themselves.

Ratan Lal Bhagat

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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