Aviators in India, in their race to get ahead, fell way behind
Circa 1997-98 –11.5 million passengers carried by four domestic aviation giants with a combined fleet of 25 – Indian Airlines (and Alliance Air), Jet Airways, Sahara Airlines and Archana Airways (yes, it did exist!). A kingly 50.7% share belongs to Indian Airlines. And profits? Well, that’s the only good news doing the rounds, with Rs.3.6 billion in operating profits flashing on their financial tablets! (Even Archana Airways with a fleet-size of just 2, made Rs.16.8 million in profits). The Indian domestic aviation sector ‘has arrived’! Or has it?
Circa 2002-03 – The number of airlines has been reduced to just three, with Indian Airlines, Sahara and Jet making merry with 53 aircrafts. Of course, Jet has the largest market share of 48.4%, with a fleet size of 41. Shamefully though, it becomes the only airline returning operating loss that year, of Rs.521.3 million.
Circa ‘the present’ – Six years back, some unknown face called G. R. Gopinath entered the Indian aviation sector with hopes of making the common Indian fly with the thoroughly untested ‘Low Cost Carrier’ LCC model, which had been a success in many First World countries. Common sense tells us that an annual traffic base of 7.7 million is never enough for launching LCCs, whether it’s Europe, US, India or the Cook Islands! But Gopinath expanded his fleet and offered cheap tickets (even for Rs.3, Rs.2, Re.1 – indeed, ‘cheap’!). Never did it make money (in fact, experts estimate that on an average, it lost Rs.50 crore everyday), and is today extinct! He wanted to capture market share and play the long-term game, but he forgot the science behind ‘breaking-even.’ Binit Somaia, Regional Director, CAPA comments, “Firstly, it was tough for management to keep control of operations given the pace of expansion, this resulted in service deterioration and poor punctuality with a negative impact on the brand. And secondly, capacity grew so far ahead of demand that the options were to either fly with half empty planes or to discount heavily, both are commercially unsustainable.”
Circa 1997-98 –11.5 million passengers carried by four domestic aviation giants with a combined fleet of 25 – Indian Airlines (and Alliance Air), Jet Airways, Sahara Airlines and Archana Airways (yes, it did exist!). A kingly 50.7% share belongs to Indian Airlines. And profits? Well, that’s the only good news doing the rounds, with Rs.3.6 billion in operating profits flashing on their financial tablets! (Even Archana Airways with a fleet-size of just 2, made Rs.16.8 million in profits). The Indian domestic aviation sector ‘has arrived’! Or has it?
Circa 2002-03 – The number of airlines has been reduced to just three, with Indian Airlines, Sahara and Jet making merry with 53 aircrafts. Of course, Jet has the largest market share of 48.4%, with a fleet size of 41. Shamefully though, it becomes the only airline returning operating loss that year, of Rs.521.3 million.
Circa ‘the present’ – Six years back, some unknown face called G. R. Gopinath entered the Indian aviation sector with hopes of making the common Indian fly with the thoroughly untested ‘Low Cost Carrier’ LCC model, which had been a success in many First World countries. Common sense tells us that an annual traffic base of 7.7 million is never enough for launching LCCs, whether it’s Europe, US, India or the Cook Islands! But Gopinath expanded his fleet and offered cheap tickets (even for Rs.3, Rs.2, Re.1 – indeed, ‘cheap’!). Never did it make money (in fact, experts estimate that on an average, it lost Rs.50 crore everyday), and is today extinct! He wanted to capture market share and play the long-term game, but he forgot the science behind ‘breaking-even.’ Binit Somaia, Regional Director, CAPA comments, “Firstly, it was tough for management to keep control of operations given the pace of expansion, this resulted in service deterioration and poor punctuality with a negative impact on the brand. And secondly, capacity grew so far ahead of demand that the options were to either fly with half empty planes or to discount heavily, both are commercially unsustainable.”
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
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IIPM Links
IIPM : The B-School with a Human Face
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