As a consumer and a citizen of India, one cannot but be completely stupefied by the state of the civil aviation in the country. The ‘open skies’ policy that envisaged a vibrant growth of the industry while at the same time promising air travel to the common man has been an unqualified failure, as is clearly apparent from the sorry state of once high-flying operators. The owner of Kingfisher Airlines is a fugitive economic offender and now, Jet Airways is flying on a similar trajectory of fold-up – the reasons may well be different. Less said about the national carrier, the better – it would have been long dead and buried without the periodic CPR and oxygen administered by the Union Government.
Affordable flying is a noble intent but apparently, the business models adopted by our carriers do not seem to render operations profitable – quite the opposite. The airlines are not generating revenue to even pay the crew for months together. Trying to sustain such models will obviously push all the remaining carriers to bankruptcy, sooner than later. India is a country where the GDP per capita is in the region of $ 2000 in comparison to the richest nation in the world where it stands at $ 175000. Therefore, all these ‘Udaan’ kind of initiatives are obviously detrimental to the health of the aviation industry. Aviation is a ‘high fixed-cost’ industry and costs of aviation fuel, maintenance, lease payments, parking costs and crew remunerations are going North while at the same time, cut-throat competition is not allowing a commensurate increase in fares, resulting in a clearly unsustainable situation where air fares are often lower than premium train AC fares. Alas, realism has fallen victim to populist measures. It is well past the time when we should have increased air fares, lowered the astronomical crew salaries, curtailed overheads and strengthened other forms of transportation. Better late than never – but let us start for heaven’s sake.
Safety is intrinsic to flying and all carriers must ensure adequate assurance on this critical aspect. Though there are basic minimum standards ensured by the regulator, operators rarely if at all, invest in advanced concepts and tools that accrue cost savings in the long term. The biggest losses in any organisation do not happen due to major accidents as these are rare. Substantial losses occur due to the cumulative impact of minor incidents and ignored risks. Operational risk management may help in averting major disasters or aid in speedy recovery with minimal impact, in addition to saving costs on repairs, maintenance and compensation. Having such robustness needs concerted effort and additional funding; and aviation industry business models must factor this as an essential feature of their operational strategy. Our national regulator, DGCA, also needs to rethink its own functioning and get contemporary with a larger infusion of domain experts who can deliver on stringent aviation safety commitments.
Funding and corporate governance also seem to have their own dynamics. The Kingfisher and Jet stories appear to suggest that stakes of the promoter at the time of borrowing investment capital may be insufficient to ensure efficient operations in the long term and fails to generate profits essential for repayment of debt. With just 10% stake, it is possible to obtain 90% funding from banks. Banks lend money on projections. Who makes these projections? And what happens when such projections fail? Anyway, once the money is released, it seems like a good strategy to park this borrowed money from Indian banks abroad and buy asylum in advance as the promoter knows beforehand that default is either deliberate or inevitable. Otherwise, is it so easy to seek shelter in a foreign country? Perhaps, it is a strategy that the rich, famous and connected can pull off with ease. Further, financial matters of such proportions are rarely decided by one individual. Surely, there are Boards of Directors and Auditors without whose approval or knowledge, no major financial decisions are normally taken – and this points to their total complicity in crime. Very few business houses of stature with the capability and financial muscle to steer the growth trajectory of our country can boast of a corporate culture that is clean and transparent. Sad but true!
Coming back to the humble flyer – please do not be enamoured with cheap fares. An air ticket that costs Rs 20000 cannot be sold for Rs 2000 without compromises being made or shortcuts being taken. And evidently, that cannot be offset by selling a sandwich costing Rs 20 for Rs 200. As a general principle, if anything is too good to be true, it is either short-lived or designed for short-term gains of a handful of unscrupulous individuals. Quality and safety come at a price which airline operators and consumers ought to pay. ‘Cheap Aviation’ is dangerous – we will never know when or where the next corner will be cut. The results could be catastrophic.