Here are the top 3 reasons calling for the ailment of Indian Aviation industry

Here are the top 3 reasons calling for the ailment of Indian Aviation industry

High cost, low yields, technical faults within aircraft are the few reasons that are calling for a precarious phase within the Indian airlines.

Jet Airways is under a debt of Rs. 15,000 crore & have unpaid salary bill of around 15,000 employees. On the same hand, Air India has a debt worth Rs 9,000 crore. If we talk about Go Air, it has grounded 10 planes out of 48 due to technical faults.”

With the constant failure of P&W engine, many airline brands (Indigo & Go Air) who were part of A320neo family were found delaying the orders, cancelling the flights & in short weren’t able to uplift the industry’s capacity.

Here, we have put together top three reasons that are holding back the Indian aviation sector to perform more than its capacity – in order to become the world’s largest aviation sector.

1. There has been a shortage of pilots

  • A Sydney based consultant has claimed that India currently has 7,963 pilots and in the coming 10 years, the country will have the need to hire 17,164 pilots more due to projected growth & the number of planes to be added.

  • The airlines have a need to hire expatriates (those who don’t live in their native country) which will again add on to the cost sheet of the airlines.

  • IndiGo doesn’t have enough staff to man its planes & has announced in February that will cut down its 30 daily flights. This again will add on the cost sheet of the airlines as they will have no other option to hire expatriates.

  • We will continue to see the widening gap between the amount of crew & the fleets. Which will only be levelled by expats – but to some extent only.

The gap between the number of rising fleets & the limited crew is still a grey area to cover.

2. Lack of government intervention

  • Airlines are constantly appealing the airlines to give relaxation on fuel taxes. The Jet fuel is 35-45% more expensive than rest due to heavy tax rates deployed on it.

  • As the Indian market is price sensitive, the government doesn’t realize that if they will keep the fuel prices low, the airlines will be able to make out more yield.

  • The government made the route dispersal guidelines (RDG) where airlines were under compulsion to fly certain percentage of flights in small & unprofitable routes – without realizing that these guidelines are resulting overcapacity in certain markets, rising costs & inefficiencies – government should give a lenient thought on that.

3. Heavy costs resulting in lowest yields

  • Jet fuel prices all alone constitute 40% of the cost to the airlines as jet fuels are taxed higher than the rest of the world in India. In the last ten years, these rising prices have pushed airlines into deep loses and fewer profit margins.

  • Between January & March-end, the state-run Indian oil corporation found the aviation turbine fuel increasing by 9%, which again if combined with low-ticket pricing in a price-sensitive market like India will hamper the airline’s profit margins.

  • According to findings, crude oil per barrel costs $60, even a slight drop of 5% yield can reflect an annual profit of Rs 611 crore for airlines like Indigo.

  • But if the price reaches $70, the yield has to increase by 5% to help airlines attain profitability – but that balance is somewhere missing.

  • Brent crude (a sweet light crude oil) currently trades at $72. However, the yields are rising due to the shutdown of Jet, but if the situation is not balanced asap, the airlines will again weep with the losses.

These are the top 3 reasons that if not addressed timely will result in continued loss & under-performance of the airlines in the long run.”

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