The challenges and the future of airlines industry

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Sai Prasanth C, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur

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The airlines industry, globally, is facing huge losses. Particularly in the second quarter of last year the business critics from across the globe started speculating the possible reasons for the losses and plausible solutions to them.Luxury comes at a price. It is high time that the airline industries accept the fact and revisit their business models. The article from The Economist consolidates the major problems that the airline industries fact these days.

  •  Unprofitable Airlines Continue to Fly
  •  High Fixed and Variable Costs
  •  Exogenous Events Can Suddenly Affect Demand
  •  Reputation for Hassles and Poor Service

Owing to these challenges, the airline industry needs to start the modification right from the grass roots. Aviation infrastructure in India is woefully inadequate. Only 21 airports serve more than one million passengers, as per the Airports Authority of India (AAI).  Of these only six airports, Delhi, Mumbai, Chennai, Bengaluru, Kolkata and Hyderabad, dominate the traffic.  Only 45 per cent of the major cities have direct air connectivity. Situation is worse in tier 2 and 3 cities. Government has failed in providing a major push to the much needed regional aviation among the tier 2 and tier 3 cities. Most of the domestic travel is limited to Tier 1 cities which provide insufficient traffic for airlines. The government promoting the smaller planes like jets or turboprops will do a major good to the regional connectivity. Turboprops offer advantages of efficiency on short runways. To improve regional connectivity, government needs to give incentive to the carriers to buy these air crafts. Indian airlines are notorious for giving away too many discounts, although they fill up the seats but do not provide any profit. This should be controlled.

Limiting Employee Benefit and reducing the fuel surcharge will also play a major role in giving the much needed push to the industry. Everything put together, the airline industry should be paid attention to by the government.

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