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<\/figure>The Indian aviation sector is slowly heading towards\nreaching a scenario similar to the telecom sector, which faced immense\ndisruption since the data pricing war started.<\/p>
At present, airlines regularly offer major discounts and\ncashback offers on flights as they want to \u2018snatch\u2019 more passengers from the\nrailways & their competitors to fill up more spots.<\/p>
Many aviation experts say that the major problem facing the\nsector is a \u201clow-cost\u201d airfare war that is driving ticket prices\nunrealistically low, even to such an extent that airlines cannot cover their\noperating costs.<\/p>
The woes faced by Jet Airways are similar to those faced by\nother Indian carriers that are struggling to remain profitable. This is despite\nfilling nearly 90 percent of their seats and recording a sharp increase in\ndomestic passenger numbers over the last four years.<\/p>
Although the higher demand in the sector reflects as growth,\nit does not necessarily add up to profitability in terms of revenue generation.\nExperts have termed the growth in the airline sector as \u201cunhealthy\u201d and even\nprofitless. <\/p>
The Real Killer<\/p> With the entry of budget carriers such as IndiGo and\nSpiceJet since the mid-2000\u2019s, full-service carriers like Jet Airways & Air\nIndia that have higher overhead costs, such as in-flight meals and\nentertainment, have been forced to offer discounts to passengers looking for a\ngreat bargain.<\/p> For instance, in 2015, SpiceJet offered base fares of as low\nas Rs 65. Average ticket prices for New Delhi to Mumbai, the world\u2019s\nthird-busiest route, fell 15 percent to 3,334 rupees in July-August 2014.<\/p> \u201cSuch fares are \u201cnot sustainable,\u201d yet there\u2019s \u201cno choice\u201d\nbut to keep offering them\u201d Rahul Bhatia, the billionaire co-founder of\nInterGlobe Aviation Ltd. that operates IndiGo, told analysts after almost all\nof its quarterly profits were wiped out.<\/p> To Robert Mann, the New York-based head of aviation\nconsultancy R.W. Mann & Co., the Indian market now resembles that of the\nU.S. 30 years ago after the government freed ticket prices from federal\ncontrols in 1978, setting off a fare war.<\/p> According to Mt Jagat Puri who\u2019s a pilot by profession, \u201cTicket\nprices on key and popular routes are always under sustained pressure from\nvarious carriers\u201d. He went on to say that, some of the prices are unreasonable\nand this leads to an unhealthy fare war.<\/p> India\u2019s airlines have particularly suffered because passengers are highly price-sensitive despite India Flying At A Loss<\/p> The Indian government also has had to prop up its\nloss-making national carrier Air India, pouring in taxpayer money to keep\nplanes in the air. In July 2018, the government pumped in \u20ac261 Million to keep\nAir India operating.<\/p> Air India has found itself in dire financial straits over\nthe past decade, saddled by a gigantic debt amounting to around \u20ac7 billion and\nhaving to beg the government for bailouts.<\/p> But while the government is looking at infusing fresh\ncapital in Air India, the private airlines need to fight for themselves in a hostile\nmarket.<\/p> What Is The Solution?<\/p> With margins slipping, fuel prices not showing any signs of\ncoming down and little likelihood of the government lowering taxation on jet\nfuel, the only option with airlines is to raise fares.<\/p> While airlines are now introducing measures to curb\npassengers from increasing flight load (recent baggage rule change), much more\nneeds to be done to make the sector profitable again. <\/p> Other than that, industry veterans such as Kapoor feel there\nis a need to focus on real growth, which can only be achieved by matching\nglobal costs and not trying to compete with the Indian Railways. <\/p> However, it would be extremely hard for airlines to move\naway from the low-cost model as passengers may again go back to travelling on\ntrains. This is where the airline industry lacks the pricing power and is\nforced to offer low prices. <\/p> Conclusion<\/p> There is little that can be done to change the fortunes of\nthe sector which is facing increased stress due to rising ATF prices and\npressure from depreciating rupee. <\/p> Considering that Indian airline carriers pay the highest for\nATF due to local taxes to the tune of 30 per cent, the only intelligent move is\nto increase ticket prices and aim at real growth rather than a boost triggered\nby discounts.<\/p>","protected":false},"excerpt":{"rendered":" Global airlines are looking to enter India, lured by the by a domestic travel boom and what\u2019s expected to be the world\u2019s third-biggest aviation market by 2025. Yet India has proven to be a highly competitive market, where profits are scarce and the life expectancy of weaker airlines is anything but certain. The best example […]<\/p>\n","protected":false},"author":1,"featured_media":12328,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[54],"tags":[82,121,132,42,136,61,64,63,128],"class_list":["post-12324","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-av-insider","tag-air-india","tag-air-travel","tag-airline","tag-airport","tag-goair","tag-indigo","tag-jet-airways","tag-spicejet","tag-vistara"],"jetpack_publicize_connections":[],"yoast_head":"\n![\"\"](\"https:\/\/i0.wp.com\/www.airwhizz.com\/wp-content\/uploads\/2019\/01\/VSEO_08_258_resized.png?resize=820%2C470&ssl=1\")
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