Ghalla Bhansali Stock Brokers Pvt. Ltd.
05th October, 2009
Airline Industry In financial turbulence
September will go down as the worst month in the labour history of Indiaʹs airlines.It saw pilots of two leading carriers ‐‐ Jet Airways and Air India ‐‐ strike work for a week within 15 days of each other, inflicting revenue losses of Rs100 crore on each and leaving thousands of passengers stranded. The labour discord was an inevitable fallout of the airlinesʹ financial troubles which have piled up in the last two years not only due to factors like soaring fuel prices and a fall in demand due to an economic downturn, but also a business model that led to unsustainable costs. There were plenty of excesses during the boom years ‐‐ from selling tickets below cost to aggressively adding capacity, hiring pilots at exorbitant salaries to chasing market share at the cost of profitability, the list runs long. All this became a millstone round their necks when the economy went into a tailspin. According to the Centre for Asia Pacific Aviation, domestic airlines have accumulated losses of Rs15,000‐16,000 crore in the last 3‐4 years. The basic function of an airline is to accommodate for passengers and cargo while taking them to far‐off places between two major cities or towns within a country or beyond geographical borders. Airline organizations can be classified into a number of segments depending on the nature and degree of services they provide. In the previous two years more than 135 aircrafts have been introduced to keep up with the increasing number of passenger traffic in Indian aerospace. A number of domestic airline groups have emerged in a reasonably short span of time to make the market furiously competitive. Aviation Industry of India and airlines in India are managed by the Ministry ...