Indian aviation: A conundrum

Dec 11 2012, 17:56 IST
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The CAPA India Aviation Summit 2012 held in Mumbai recently saw industry leaders engage in dynamic discussions on the existing challenges, future of the Indian aviation sector and investment opportunities. The CAPA India Aviation Summit 2012 held in Mumbai recently saw industry leaders engage in dynamic discussions on the existing challenges, future of the Indian aviation sector and investment opportunities.
SummaryThe CAPA India Aviation Summit 2012 held in Mumbai recently saw industry leaders engage in dynamic discussions on the existing challenges, future of the Indian aviation sector and investment opportunities.

FDI does not happen and Kingfisher Airlines collapses. Had FDI come three years earlier Kingfisher Airlines might have survived. We businessmen are to blame as we cozy up to politicians and do not think long term for the industry. There is no future for any of us if we do not expand our customer base as then we will cannibalise each other's passengers.”

Low cost not low fares

The only positive picture emerged from the LCC success story, is the fact that in India low cost airline does not necessarily mean low fares. Aditya Ghosh, president, IndiGo Airlines stated, “We have seen massive improvement in airport infrastructure. Today no one talks about parking issues. The market has rewarded us for being a carrier that offers low fares. However, I still feel that the fares are too high. The cost of operating an airline in India is excruciating. However I'd prefer to be in the world's fastest growing market than one that shows zero growth though other factors might be positive.”

According to Sudheer Raghavan, COO, Jet Airways, the term 'low cost' does not exist in India and it was only because of 'survival' that Jet Airways plunged into JetKonnect. “Seventy per cent of the customers wanted low fares. It took us three days to make a decision,” he pointed out. The airline has also developed a capacity for large inventory as 'swing capacity' depending on season. “While we fight for revenue there is a big opportunity to collaborate on cost reduction,” he added. Neil Mills, CEO, SpiceJet believes that low cost anywhere around the world has to be changed to suit the environment. “Low cost is more about efficiency, about management, about how you run the business, how many staff you have, etc,” he

stated.

India also sees the absence of of flexible fare structure. The concept of non-refundable fare is absent. Deepak Brara, director commercial, Air India averred, “We've not had the courage to experiment. Everybody has burnt their fingers terribly the last few years that they are afraid to take risks.”

Looking beyond full service

Delving on the issues, challenges and opportunities and an action plan needed for running full service airlines in the Indian market, the unanimous opinion was that of the cost structure as principally it is (aviation) a price elastic market. Hence cost and tax structure to certain destinations which are not viable are pulled back

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