Tuesday, December 28, 2010

A decade of booms and bust-ups for the aviation industry

For all of us air travelers in India, the last decade has no doubt been hugely transformational: swanky airports and numerous airlines to choose from. No doubt for the airline industry the last 10 years has been a long eventful flight.The decade began with just three home grown airlines – Air Sahara, Jet Airways and Air India. During the disinvestment drive in NDA regime, the national carrier was put on the block for a stake sale. However, the plan faced stiff political and employee resistance and resulted in the idea being stalled.It was about then that Captain GR Gopinath, founder of Air Deccan, made his entry into the aviation space – launching the first-ever low cost carrier, Air Deccan, making the common man's dream to fly, come true. Deccan proved to be a game-changer. More budget airlines followed and in a span of just three years Air India express, SpiceJet, indigo and go-air all began commercial operations.It was during this phase that the king of good times, Vijay Mallya launched his kingfisher airlines. Just as quickly as the sector has emerged, it also saw consolidation. Jet airways' bought out Air Sahara and air Deccan was acquired by Kingfisher Airlines. With the sudden emergence of the aviation sector, airports in the country were choking, unable to cope with the load. The government stepped in giving a green signal for privatization of all major metro airports. But by then hit by the onslaught of private airlines, national carrier air India was bleeding. The government decided to merge Indian Airlines and Air India to fly it out of rough weather.But soon after, the financial meltdown struck, and the global aviation sector took a hard hit. Fuel prices soared, air traffic dipped. By the end of 2009, the domestic airline industry had accumulated losses to the tune of $1.7 billion. The national carrier which was accumulating losses for over 4 years was forced to go to the government seeking financial aid.The year 2010 saw the global economy make a fragile recovery and airlines witnessed a rise in traffic. Though domestic airlines have begun to book profits for the first time in last three years they find themselves cash strapped with their collective debt piling over Rs. 60,000 crore.The private airlines are looking at the RBI's debt restructuring plan as a ray of hope while Air India is seeking more cash infusion from the government to see itself out of the red. It will no doubt be interesting to see in which direction the Indian aviation industry flies to in the coming decade.