The Indian Aviation Industry is all set to undergo structural changes due to the entrance of new players.
What’s Happening?
An existing aviation company Spicejet is in the news for all the wrong reasons. There have been nine instances since May 1, 2022, when their pilots had to make an emergency landing for several reasons. These include engine failures, fires, a windshield crack, etc. Following all these glitches, the Directorate General of Civil Aviation (DGCA) issued a warning notice to Spicejet, stating that the carrier had failed to establish its services were safe, efficient, and reliable.
Concerning Indigo, on July 02, 2022, 55% of its domestic flights were delayed as the crew members went on sick leave. Coincidentally, it was the recruitment day at the Tata-owned Air-India! Also, Indigo flights were on time the very next day!
New Entrants
Meanwhile, the Rakesh Jhunjhunwala-backed airline company Akasa Air has received its Air Operator Certificate (AOC) and is slated to commence operations by July end. By the end of FY23, the airline will have 18 aircraft in its fleet, and thereby 12-14 aircraft every month, which will make up its order of 72 delivered planes over five years.
Also, the Tata-owned Air-India will be eyeing to start operations soon and regain its lost golden days!
Should This Concern You?
All these changes in the industry are happening at a time when oil prices remain elevated. Also, as stronger players enter the industry and the weaker ones are forced to exit, airfares could be pushed downwards.
Lower revenues with higher costs are not desirable for any airline company. Except for Indigo, which has close to 58% domestic market share, it’s time for investors to be in a wait-and-watch mode!
What Lies Ahead?
Irrespective of the number of players in the industry, higher oil prices will lead to higher Aviation Turbine Fuel (ATF) prices, which will start to pinch every player as these make up 30-40% of the total costs of an airline company!
Although the Indian aviation market has much growth potential, spreading any contagious disease again may lead to travel and leisure activities taking a severe hit.
