By the early 90’s few airlines cropped up, apart from the national operator, but most of them couldn’t manage to survive, may be due to lack of efficient management control or poor route optimisation strategy. But the ones who survived were serious players. The service issues compelled the national carrier to take the back-seat paving path for the new entrants to grab the market, but still it was fair as the yardstick of measurement was related to quality of service, as they were all full-service carriers. Pricing standards were intact with yield per passenger remaining healthy, profit margins good and job security was ensured. Here, I would like to intimate my readers and remind them that one job secured means a minimum of four lives saved.
But early part of 21st Century led the foundation stone of a great disaster awaiting the aviation industry of India as few other budget airlines (Low Cost Carriers) joined the race. One of the entrepreneurs of a budget airline had a “Common man’s dream” imbedded in his mind, that he wanted to experiment on. He wanted all classes of people to travel. Without getting into his source of income and revenue generation strategy, it can be stated that his concept triggered off the price war in aviation industry as base price of tickets were slashed abnormally for certain number of blocked seats by the invention of various promotional schemes, as the target was to make the “common man fly”.We have seen a time when the base price of a ticket was slashed to Rupee One Only. We all know that price war is the last thing any industry would like to welcome.
With this abnormal pricing strategy destroying the market, it was the time for the race to begin. The race to fill up flights with passengers at any cost, even if it was at the cost of negative revenue earnings, as expenditures to operate a flight became more than the income from a flight. The already existing carriers being full service ones, also followed suit to retain market share but suffered more damage than the new players who came in with the model of low cost carrier, as the cost of operation of a full-service carrier is much more. Whatever be the model of operation, all the airlines stopped bothering about profitability and survival. They were in the hunt for eating up each other’s market share. Capital erosion, which eventually proved to be fatal, was not paid any heed to at that time and elimination of competitors gained momentum. With such decrease in fare it was within the ambit of the common man to fly. Please don’t misunderstand me as I am not undermining the common man’s dream coming true and their wish to fly, but if it costs the industry overall, I have an objection. If it’s at the cost of the bread and butter of an airline employee, I hold a point. It is because it’s not an employee alone, it’s the families of the employees whom we are putting up as a stake in this gamble and more the future of the whole aviation industry also.
Here I have a question. The civil aviation authorities objects when airline charges higher fares and treats the same as malpractice citing the logic that it is detrimental to the interest of the flyers and asks airlines to fix the upper limit of fare to be charged, forcing airlines to lower their earnings. But they never object airport authority’s decisions on increase in navigational charges which is recovered at the cost of airlines’ exchequer. Then, why at that point when prices were manipulated at bare minimum of a rupee, they didn’t regulate the minimum fare by apprehending that this price war will put the whole industry at stake? The national carrier runs at the cost of tax payer’s money, so loss or profit for them have never mattered. Is it then within the ambit of civil aviation authorities to interfere when prices are high and keeps dumb when prices are low?
However, let’s come to this industry’s story. So, the capital erosion started for all the airlines, the airline industry turned into a vegetable market, rather it became worse than vegetable market to be precise. Most importantly the human mindset was affected as they were convinced that they can always get air tickets at a cheaper price and that mindset is still prevailing on today’s date also.
Final outcome? The person with Common man’s dream sold his airline at a premium price to another airline’s entrepreneur and made a fortune out of it. But by the time this happened the damage was already done. The market was spoiled and, in the spree, to attain more market share in terms of passengers, airlines persisted with the price war and some of them perished.
The question arises, was it only the “common man’s dream” that the entrepreneur wanted to fulfil? Or is it that he wanted the accomplishment of his own mission of gaining the rein of the whole market and eliminating the other competitors, by initiating this price war? But when he understood that the others are much stronger players than him, he sold his airline by making a fortune out of it and left the market! That’s why in my initial discussion I termed his dream as an experiment.
Impact of this dream fulfilment has been severe on the industry. Multiple airlines have closed due to this price war, thousands are jobless and if we consider family it will run into lacs, who are striving to have a decent meal twice a day, a few hundreds have committed suicide with helpless families roaming around and most of the other jobless airline staff are finding them in compromising situations. Who will take the responsibility? Government is apt enough to shrug it off as usual, civil aviation authorities will show guidelines, the inventor of the dream is in his cosy bed with hefty bank balance.
Even today all the carriers are resorting to this price war. Most of the airlines’ Balance Sheets are in Red. Every day there is an apprehension that one or the other of these airlines will succumb to the pressure. Job security has gone for a toss. Answers awaited. The employees demand it, if not the industry, who are also common men, whose dreams have been shattered.