Aid the aviation before it gets vanished away says market analyst Deepak Talwar
Indian Aviation Industry — A sector that registered nearly 2 billion domestic and international trips in 2018 amounting to approximately $94 billion customer expenditure including transport, accommodation, and food. The Air transport industry contributes nearly $70 billion to India’s GDP annually.
Yet, how do people remember Indian aviation? Jet Airways closure, Air India debt crisis, or the recent Kerala plane crash that killed 18 people. So, where does the problem lie?
Deepak Talwar says, “Indian aviation industry is looking at absolute paralysis. A mixture of prolonged issues combined with the unique situation of COVID-19 could wound the country’s leading transport choice for good. The problem lies in selective visibility.
Comfort, luxury, and external beauty have masked issues such as fuel prices, high taxes, lack of pilots, faulty plane models, and absence of relief package from the public. As a result, the common man and subsequently, economy, are suffering outrageous discomfort.”
Looking at aviation from the perspective of balance sheets and profit margins, Deepak Talwar’s hint at the underlying issues is credible. Aviation Turbine Fuel (ATF) constitutes 40% expenditure for any airline and continues to be subjected to the highest tax bracket in the world.
The product has not been classified under GST purview and is directly responsible for soaring ticket prices in the Indian cost-sensitive market. Additionally, Jet Fuel is sold at 40% higher price in India, denting the profit margins for decades.
Shortage of skilled personnel is another prolonged issue. The expansion rate of airlines isn’t in tandem with the number of commander pilots and aviation staff available in India. Due to this, companies have resorted to expatriate hiring, whose expenditure is ranked right after fuel. With no government relief, monetary or policy-oriented, airlines continue to procure losses despite functioning at reasonable capacity.
To top it all, COVID-19 is a different ball game. The unfortunate timing of the global pandemic has forced the aviation industry to fly at half capacity, for not more than 9 hours, with mandatory vacant seats for social distancing. Prices are bound to sky-rocket and translate into losing passenger confidence in an industry that lacks liquidity and stands to crumble under a debt mountain.
“The current situation is unfortunate, but not irreparable. The government needs to aid aviation before it dies. An immediate liquidity injection along with GST bracketed ATF is expected to lay the grounds for airline recovery and mark the initial shift towards profit,” added Deepak Talwar Corporate Analyst.
Furthermore, the government can help airlines such as SpiceJet, Indigo, and Air India in terms of employee salaries. This could be a masterstroke at retaining jobs, employee trust, and a financial breather for companies. In return, carriers need to revamp their pricing policies to encourage the customer and spark the market again.
It is clear that the Indian aviation industry cannot sustain without government support. The two institutions must work in collaboration with absolute transparency in order to save the livelihood of countless aviation employees and restore the sector’s economic contribution.