In the wee hours of 8 May, thousands of passengers found themselves stuck at their respective destinations. As dozens of Air India Express cabin crew reported sick at the last minute, the airline had no option but to cancel and/or delay more than 80 flights – leaving its passengers high and dry.
A week later, the country’s leading airline IndiGo was caught in an incident of grave mismanagement. Podcaster and writer Neelesh Mishra, who was flying to Lucknow from Delhi, describing the incident, noted about “IndiGo’s tales of arrogance and lack of empathy about.”
India’s civil aviation sector is growing by leaps and bounds, passenger traffic has scaled way above the pre-pandemic levels and new airport infrastructure are coming up fast. But such incidences, causing mass-scale distress for air travellers, are increasingly growing common.
According to experts that Business Today spoke to, a few key fundamental issues overshadow the growth story. And passengers may have to face these challenges for the time to come.
One of the main reasons behind such frequent delays and cancellations is the lack of enough aircraft and crew members at the disposal of airline staff. According to Jitendra Bhargava, an aviation consultant and former executive director of Air India, pilot shortages, lack of backup staff and infrastructure, low turnaround time of aircraft, and tight cost-efficiency model of operation are leading to abrupt flight cancellations.
Bhargava said most leading airlines in India are operating under severe stress, which often results in abrupt flight cancellations, unannounced delays, and appalling customer service.
Data from the Director General of Civil Aviation (DGCA) shows that technical snag is by far the key reason behind flight cancellations in non-winter months. For example, in May 2023, 56% of the flights cancelled were due to technical snags (May 2024 data is yet to be released).
The airlines may have embraced the low-cost, high-efficiency model but that has fallen short of yielding the desired results. Despite their efforts to keep costs in check, all leading players in the market continue to operate in red.
Take the case of Air India, for instance. In 2020-21, the last full year for the airline under the government’s control, Air India’s net loss after extraordinary items stood at Rs 6,564 crore. A year later, it expanded by 46% to Rs 9,557 crore. In 2022-23, Air India’s bottom-line turned even darker as net loss grew further by 19% year-on-year to Rs 11,388 crore. In the 10 years between 2013-14 and 2022-23, Air India has reported a net loss in each year – ranging between Rs 3,837 crore and Rs 11,388 crore. During the period, the airline has bled over Rs 71,130 crore.
While its financial numbers for the recently concluded 2023-24 are yet to be filed, analysts say it is highly unlikely that Air India will turn profitable anytime soon. “The cost structure that an airline like Air India is operating under is a major roadblock for them to turn any profits at the net levels. The fixed costs are quite high and it cannot cut down the same, irrespective of demand or sale of seats. That is a key reason why most airlines are in losses for years,” says Rajat Sharma, founder and CEO of Sana Securities. Vistara’s net losses have swelled to Rs 1,397 crore in 2022-23. For Air Asia, another airline from the Tatas’ stable, between 2013-14 and 2022-23, net losses have grown from Rs 133 crore to Rs 2,748 crore.
Experts are not surprised by the numbers. The model and macro-environment under which airlines in India operate make them susceptible to financial losses, they say. According to Anil Radhakrishnan, research analyst at Geojit Financial Services, India is highly dependent on imported aviation turbine fuel (ATF), which alone ranges between 40-55% of airlines’ total expenses. Now add to it additional expenses like rentals and aircraft repair and maintenance, aircraft and engine rentals, and airport fees and charges. These, together with ATF costs – take the share to 65-80% of airlines’ total expenses.
According to Sharma, despite following a low-cost model the headache for airline management in India over turning profits is not going to end anytime soon. Moreover, since most airlines offer similar quality of services and domestic routes ranging between 2-2:30 hours, passengers tend to choose the cheapest seats available. This, has forced airlines into a cut-throat pricing model, further impacting their finances.
