The Indian aviation industry is passing through a bad phase, where all airlines are reporting mounting losses due to Jet fuel rising prices and due to steep fall in load factors. The main culprit is the ATF rise spike. However, the airline itself is also responsible for the present condition. They are the ones who were left free to decide revenue model, capacity addition etc. Recently, the fares were increased by 10-15% but the airlines did not see any significant drop in traffic. They are now cutting down on excess capacity and have no option but to charge realistic fares.
The growth in international traffic has not been unrealistic, compared to the unrealistically high grown in the domestic sector. It has stayed steady at 14-15%. In my opinion, the prescriptive ban on overseas flying is no longer in sync with global trends and needs to be reviewed. It would be highly appreciable if the rule of “carriers must have completed five years of domestic flying” is not being made so rigid. Also, the five year term should be reduced to two or three years. We should also start allowing narrow body aircraft for near destinations, like Gulf and neighbouring countries. The wide body one could be used for long haul. This is the way to effectively use the bilateral rights.
The airline industry has to be reasonably strong to withstand whatever comes with foreign investments, both the good and the bad. In India, our airlines have neither the equity base nor the net worth to stand bottom line shocks. Also, the airlines themselves should have studied global trends before creating capacities. No where in the world is growth in aviation more than the GDP growth. Today excess capacity is almost 20% which is pretty high. Also, the growth happened because of undercutting of fares. The fares were kept unrealistically low and everyone continued to lose money.
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