The obviously complex situation of cash-strapped Kingfisher Airlines, which the government is grappling with, is symptomatic of the wider malaise hurting the airline industry. Apart from the global environment and the rising price of fuel,
which have taken a toll on travel and global tourism, the domestic environment, to some extent, is equally hostile. The aviation scene has not changed much since the Open Skies policy was introduced decades ago. The industry has been bogged down by the high cost of aviation turbine fuel, which, because of high sales tax and the depreciating rupee, is the most expensive in the world. There is also the issue of labour on the cost side. On the revenue side, cut-throat competition between airlines has hit most of them severely, specially Kingfisher.
In fact the airline industry has never been hugely profit-making, even globally. As Warren Buffet is believed to have famously said, if you want to become a millionaire, then as a billionaire start an airline and become a millionaire. But, that apart, most of the people who started airlines, even in India, knew nothing about the business. They were not even in the travel business and that’s why many of them bit the dust in the first flush of the Open Skies policy. It became a graveyard for the likes of Damania, East West, NEPTC (which was into making windmills), Paramount and ModiLuft, to name a few. The most successful airline today is IndiGo, which has a pedigree of one of the best travel agencies behind it. Naresh Goel of Jet is another example. Air India is an outstanding example of a profit-making airline being converted to a loss-making one after bureaucrats started to head the carrier. There were five IAS managing directors when the losses started.
The polite noises that civil aviation minister Vayalar Ravi made about trying to come to the aid of Mr Vijay Mallya seems to be predicated on the woes of the industry in general and what it would mean if Kingfisher was allowed to go belly up. Mr Mallya himself has been tweeting about the need for FDI in the airline industry. This would be the most obvious solution for the cash-strapped industry. Carriers like Emirates, Qatar and Singapore Airlines are just waiting for an opportunity as their home markets are saturated. The government will have to think fast if it does not want to miss the tourist season, which peaks November to March. Since security is an issue FDI can be capped at 49 per cent, as in the case of the security logistics industry. The immediate need is to tackle airline schedules, which have already been thrown askew. Mr Ravi has options like making airlines like Jet and Spice Jet enhance their flying hours. They are reportedly flying below the number of hours per month
specified by the Directorate-General of Civil Aviation. Maybe Air India, too, can pitch in. Taxes on ATF can be reduced. It is undoubtedly a
complex situation.