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Why are Indian Airlines Grappling for Sustenance?

Inflation in fuel prices, high-priced parking and landing expenses and overdue debt are some of the common problems that airlines deal with.
BY Jaspreet Kaur
Feature Writer, BusinessEx
Jul 18,2019

The aviation industry, one of the fastest means of transportation, is presently facing turbulent phase in India. This is taking place when air travellers have increased globally and “the number of international tourist arrivals increased from 1.24 billion arrivals in 2016 to 1.32 billion in 2017,” according to Statista’s report. 

Problems are surfacing one after the other for the Indian aviation industry. So far, two major Indian carriers i.e, Kingfisher Airlines and Jet Airways have closed down their operations. High fuel prices, lack of funds and overdue loans are some of the primary reasons that ceased airlines permanently. Another Indian carrier might be on the same ground as difficult times have surfaced in Indigo owing to conflicts between two prime stakeholders.

Why has Tumult Arisen in the Indian Aviation Industry? 

In comparison to the previous year, domestic passenger traffic has increased by nearly 2 per cent. According to DGCA’s report, “Passengers carried by domestic airlines during Jan-May 2019 were 586.54 lakhs as against 571.58 lakhs during the corresponding period of the previous year thereby registering a growth of 2.62 per cent.” However, surged passenger traffic has not largely affected the Indian aviation industry as airlines are still striving to bring normalcy.

Inflation in fuel prices, high-priced parking and landing expenses and overdue debt are some of the common problems that airlines deal with. Another emerged problem, which has affected the Indian airlines, is grounding of Boeing 737 Max’s. Owing to crashes by Boeing 737 Max’s, the planes of this model are grounded by all airlines until the investigation ends, according to the daily news, India Today. 

Following this, there is another problem which is affecting the Indian aviation industry--US and Iran tensions. The relation between the US and Iran have turned bitter and consequently, India is facing an impact of that. The supply of crude oil has already been cut from Iran and along with that Indian airlines have begun avoiding the Iranian airspace, taking longer routes or rerouting planes, which have increased the cost of operations for airlines by roughly INR 37 lakh, according to the cited reports.  

To help the airlines, the government is coming up with schemes such as UDAN Scheme. Under this scheme, the government tries to make flying cost-effective for airlines. This plan fundamentally connects un-served and underserved airports in India. More so, the government will subsidise airlines in this plan. 

However, even by making this move, damage to the airlines could not be altered as the government has restrained growth of the airline through some of its severe moves. 

Government’s Play in the Story

In the Union Budget 2019, the government showed concerns about deteriorating Indian carriers and thus, made a proposition to make India an MRO (Maintenance, Repair and Overhaul) centre. While assessing conditions of the Indian aviation industry, the government overlooked its 5/20 rule, which curbs carriers to grow. Under the 5/20 rule, national airlines that want to fly abroad need to have 5 years of operational experience and a minimum fleet of 20 aeroplanes. This regulation applies to all commercial carriers. By this norm, the government has limited revenue generation of the airlines. 

To shore up airlines, the government needs to come up with effective plans that will facilitate airlines in flying and at the same time, decrements their operational costs. 

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