Explainer: What makes aviation a tough business

Tribune Web Desk

Vibha Sharma

Chandigarh, May 5

The case of the Go First is perhaps another stark reminder of how tough the aviation business is to run and maintain, not just in India but worldwide.

Amid the speculation about the future of the crisis-hit Go First, experts believe that the plea seeking voluntary insolvency resolution proceedings may not see happy landings.

The development is also facing vehement opposition from aircraft lessors.

Reports suggest that the owners of the airline, the Nusli Wadia Group, are expected to push for a one-time settlement with banks under which creditors will be taking a “substantial haircut”.

Experts say the owners may have filed for bankruptcy with a hope for future survival of the airline, recovery in the aviation business is tough as proved by the earlier case of Jet Airways.

Broadly, it is bad news for all concerned—banks, creditors and employees.

Meanwhile, SpiceJet’s Dublin-based lessor Aircastle has also moved an insolvency petition with the NCLT over unpaid lease rentals for four B737-800s aircraft, according to reports.

Aviation not another high-flying glamourous business

The fact is Go First is not the first airline to go bust and it may not be the last. 

Ever since the opening of the skies for private players in India in the 1990s, many companies have gone under like the Kingfisher Airlines and the Jet Airways. Some like Air Sahara tried to stay afloat with efforts like a mergence but in the aviation business once things start going wrong, it generally remains the way.   

Go First has given reasons for its poor performance like Pratt & Whitney engine troubles and Covid-19, but are these the only reasons for the airline running into rough weather, perhaps not.

Aviation may come across as a glamorous, high-flying business but it is not easy to run an airline. It is a highly competitive market place out there.   

The initial cost infusion may be relatively easier but to keep a balance between the accounts, operations and aspirations of passengers is a very tough job

The management has to cater for high operational and maintenance costs, super-high jet fuel and airport charges, flight safety issues and highly paid pilots    

The heavy capital-intensive industry requires regular capital infusion. Had it not been for the government, the now-privatised Air India would not have managed to survive.

Why do airlines go defunct?   

More than 15 airlines have gone under in India over the past two decades.  And it is not just in India

A number of well known airline brands have disappeared from the world skies following mergers for survival or closures due to financial problems, labour issues, increased competition and operational issues, etc. They include some iconic names like Pan American World Airways, Trans World Airlines, Eastern Airlines Air Lines and Continental Airlines

In India, the market is considered low fare but airline operations are anything but that. Operational costs here are perhaps among the highest in the world. The cost of the jet fuel is one of the highest and so are airport costs. 

Perhaps Indian airports are a bit more extravagant than it requires for a low-cost airline to remain viable. A low-cost airline needs lower handling, landing and parking fees at airports. If passengers want to avail extravagant facilities, they pay for it like in some foreign countries. Jet and Kingfisher also went defunct because they could not manage low fares without low operating costs.

Making an airline operation viable needs tough and prudent decisions on the type of aircraft. If an aircraft has many types, it has to shell out money accordingly. Experts say an airline needs a good business model to be successful.

There are ways to reduce fuel consumption with good operational and maintenance practices like towing a plane to the runway to cut pre-flight fuel consumption, reducing passenger service and entertainment items, monitoring weather and air traffic at airports to adjust speed of planes to prevent circling overhead. 

But the fuel costs too have to come down.

According to the latest Economic Survey, India’s civil aviation sector has “great potential” due to growing demand from the middle class, higher disposable incomes and favourable demographics. Hopefully, Indian operators are able to make the most of it.

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