Professional Management is the Key

The reasons why a number of the newly established airlines failed and had to shut down operations, are varied and specific to each carrier

Issue: 3 / 2020By Air Marshal B.K. Pandey (Retd)Illustration(s): By Anoop Kamath

Based on the pattern of growth of the Indian civil aviation industry over the last three decades, analysts are of the view that India has bright chances of becoming the third largest civil aviation market in the world by 2024.

Commencing with the first commercial civil aviation flight in 1911 from Allahabad to Naini, the Indian airline industry has indeed come a long way from a rather humble beginning and today, it is globally competitive as well as aspiring to attain greater heights of success. But the real turning point for the industry came in the 1990s when the Government headed by Prime Minister Narasimha Rao duly supported by the Minister of Finance, Dr Manmohan Singh, took the bold step to unshackle the civil aviation industry through a process of liberalisation that removed all the barriers for the private sector to foray into a domain that hitherto was reserved exclusively for Government-owned airlines. However, it was only in 1994 that the Air Corporations Act was repealed by the Government, a step that paved the way for the entry of private carriers to operate scheduled services in the Indian skies. In the wake of these developments, the nation witnessed the emergence on the Indian scene of a number of airlines in the private sector such as Jet Airways, Air Sahara, ModiLuft, Damania Airways and East West Airlines. Unfortunately, none of these pioneering ventures other than Jet Airways, managed to survive. But as luck would have it, even Jet Airways that was regarded as one of the strongest and best run airlines in the private sector that survived for two and a half decades and had built up a good reputation, ultimately fell by the wayside. In fact, it has been difficult for the Indian airline industry as well as the nation to reconcile with the fact that the strongest carrier in the private sector folded up in the manner it did.

In the period 2004-05, a number of low-cost carriers entered the Indian scene. These were Air Deccan, Air Sahara, Kingfisher Airlines, Paramount Airways, SpiceJet, GoAir and IndiGo Airlines. Of these, the first four did not have the strength to survive in the difficult business environment and hence discontinued operations. The last three remain functional with varying degrees of financial strength. More recently, AirAsia India, a joint venture between Tata Sons and AirAsia Berhad of Malaysia and Vistara, a joint venture between Tata Sons and Singapore Airlines, have entered the fray. In both these airlines, Tata Sons hold 51 per cent stake that provides a high degree of stability through a strong financial base.

The reasons why a number of the newly established airlines failed and had to shut down operations, are varied and specific to each carrier. Jet Airways was a full service carrier and catered largely to the corporate world. However, in the highly competitive business environment in the Indian airline industry, Jet Airways could not sustain a competitive edge against IndiGo, SpiceJet and GoAir that were wedded to the low-cost model. Jet Airways had regarded these low-cost carriers as “fringe players” and hence had clearly underestimated their potential to wean away passengers from full service carriers through their offer of fares that were so low that Jet Airways could not maintain its dominance in the market. The problems of a highly competitive market faced by Jet Airways, were unfortunately compounded by a number of flawed decisions on the part of the management.

By the end of 2014, an erstwhile prosperous low-cost carrier SpiceJet that had been bought over in 2008 by Kalanithi Maran belonging to a well known political family from Tamil Nadu, found itself on the verge of financial collapse. SpiceJet was in such a financial state at the end of 2014 from which not many airlines including Kingfisher have managed to recover. It was in the midst of a severe financial crisis that the previous owner Ajay Singh stepped in and bought the airline back from the Maran family and set the sinking airline back on track with remarkable dexterity in management that was highly professional. The turnaround of SpiceJet is a notable success story in the history of the Indian airline industry attributable primarily to Ajay Singh’s highly professional management skills.

The largest budget carrier in the airline industry owned by InterGlobe Aviation, is IndiGo Airlines. Founded in 2006 by Rahul Bhatia and Rakesh Gangwal, a United States-based NRI, the airline expanded rapidly recording impressive financial performance and by December 2010, IndiGo replaced the national carrier Air India as the third largest airline in the country. Despite rising input costs and other impediments, IndiGo managed to sustain its impressive performance and had the largest market share by August 2012, surpassing Jet Airways in just six years of operations. As of October 2016, it became the largest airline in India with a market share of 42.6 per cent and by mid 2019, IndiGo garnered market share of 49 per cent, emerging as the leader.

A study of the performance of carriers in the Indian airline industry clearly reveals that success of an airline depends ultimately on competent and professional management.