By Bikram Vohra
In the future, as competition becomes stiffer, there will be a call on all airlines to get their house in order. Failing which the door will slam on them. It’s not as if this hasn’t happened in the past and in today’s aviation world, good intentions are a positive signpost to hell.
India’s carriers will also have to introspect and see how they can balance service with cost-cutting exercises. The murky past will give them a pretty good example of the pitfalls to avoid and smoothly fly past fiscal turbulence. But to be fair the past does not paint a very pretty picture. The solution does not lie in passing the financial balloon onto the passenger because there is a limit beyond which flying becomes an option with uncomfortable liability. Several Indian carriers have faced financial challenges and have either suspended operations or ceased operations altogether over the years. Some of the notable Indian airlines that have failed or shut down make for very sad narratives.
Before we discuss the parameters of sustainability and profit in airlines in the country let’s have a look at the lessons learned from yesterday. One of the most high-profile failures in the Indian aviation industry, Kingfisher Airlines, was grounded in 2012 due to a severe financial crisis. The airline struggled with mounting debt, operational issues, and regulatory challenges before calling it a day. By the same token, once a trendsetter in the aviation market, Jet Airways encountered financial difficulties and suspended operations in April 2019. The airline faced challenges such as high debt, fierce competition, and rising operating costs, leading to its eventual downfall. And what a mess it was… and still is.
Largely forgotten in history, a regional airline from Bangaluru, Air Pegasus, ceased operations in 2016 due to financial troubles. The carrier faced issues related to funding, regulatory compliance, and operational sustainability, grounding it for good.
Hardly anyone remembers MDLR Airlines, a regional carrier operating in northern India, shut down in 2009 after a brief period of pie-in-the-sky operations. The airline faced challenges related to financial viability and operational sustainability and lost its way pretty much after take-off as a corporate entity.
Tom-tommed as an airline with a fresh attitude Air Costa, based in South India, suspended operations in 2017 citing financial constraints. The carrier struggled to compete and frittered away its bottom line.
Globally, the airline industry is known for its challenges, including high operating costs, volatile fuel prices, intense competition, regulatory hurdles, and economic uncertainties, all of which can impact the viability of airlines, especially those with weak financial structures. Every one of these factors is relevant to the Indian condition even more so now than it was 20 years ago.
Cost management is the most critical aspect of the operations of Indian air carriers, and while they employ various strategies to control and reduce costs effectively inflated costs, self-aggrandizement, bad planning and short-term thinking all contribute to mangling the bottom line. One of the factors that is unique to India is the personality cult where the top honcho, to coin a phrase, becomes a singular standard for all decisions. This can become almost a cult and everybody else then is made so secondary as not even to be noticed. Cultism has always been an issue and nothing has dramatically changed yet.
In a nutshell, there are a few obvious areas of concern that have to be addressed at the very beginning. This is not rocket- science and yet it is amazing how many airline managements fail to understand and appreciate the impact that even an aspect out of kilter can upset the applecart. Now, let’s examine a few of these and see if there are any answers to the questions raised. Fuel costs typically account for a significant portion of an airline’s operating expenses. Indian carriers can and are now focusing on enhancing fuel efficiency by using newer, more fuel-efficient aircraft, optimizing flight routes to minimize fuel consumption, and implementing fuel-saving practices during flight operations. However, until the fleets are updated and modern fuel-saving engines powering the new aircraft the losses of the past continue to give a certain amount of drag. It is this drag that can bring an airline down.
It has to be said that in the past the wrong priorities have often kicked in. Non-profitable routes commanded under government pressure and often done for the sake of pleasing the corridors of power the accumulated losses were crippling. Air India, under multiple managements, is a historical and classic example of this incompetence and frightful route planning. Efficient utilization of aircraft is crucial for maximizing revenue generation and reducing costs.
When airlines take off they often make the error of overspending. This hoopla has a habit of rebounding and wrecking long-term plans. Managing staffing levels carefully is essential for controlling costs without compromising on service quality. Even the expenses on headquarters imaging can sometimes go over the top.
One of the areas that impacts right across the board and must be recognized at the very beginning is that of regular maintenance of aircraft. This is vital for ensuring safety and efficiency as well as reliability, but it can also be a significant cost driver. Delays in maintenance schedules and compromised approaches to keeping aircraft in good condition instead of having lengthier minimum equipment lists can, in the long run, save a bundle of money.
Efficient supply chain management can help Indian airlines procure goods and services at competitive prices. While this may not be the ideal moment in time to discuss the importance of supply chain management, the current stress in this area underscores the importance of negotiating favourable contracts with suppliers, streamlining procurement processes, and optimizing inventory management. This must be an ongoing operation and not done in a haphazard fashion.
Having the right priorities in setting up the infrastructure would also include technology adoption because investment in modern technology and the advent of artificial intelligence can improve operational efficiency and reduce costs. From implementing advanced reservation systems and revenue management tools to leveraging data analytics for decision-making, airlines that use technology to streamline processes and enhance productivity will get a leading edge.
While outsourcing does have its old set of problems and the airline becomes responsible for their competence or lack of it in the long run outsourcing non-core services like ground handling can be a cost-effective strategy for Indian carriers. The trick lies in choosing the right sort of partners and making sure that safety measures are incorporated into any agreement. If this goes wrong, it can go horribly wrong.
One scary phrase Is that of adopting lean principles. While this lean mean fighting machine concept sounds very good it cannot have an adverse effect on the efficiency of the services offered to the passenger. Yes, it can eliminate waste, improve process efficiency, and reduce costs but has to be a 24/7 ongoing process.
Now we come to the big bugbear of aviation and that is route rationalization. While it seems to be based on sheer common sense it’s incredible how many airlines get this wrong and have to pay a price for it. A regular evaluation of the route and the network to identify unprofitable routes or adjust schedules accordingly and make full use of the slots to one’s own advantage are the elements required in what is now a very important part of the bottom line. By implementing these cost management strategies, Indian air carriers in India can enhance their operational efficiency, control expenses, and maintain a sustainable business model in the highly competitive aviation industry. The point is will they do it?
Bikram Vohra is the Consulting Editor of Indian Aerospace & Defence.
