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A dead airline is rising from India’s aviation graveyard. What will it change?, ET Infra


India is known as the graveyard of airlines because the Indian aviation sector has seen so many airlines either go out of business or sink under heavy losses. From EastWest and Damania in the 1990’s to MDLR, Paramount, Kingfisher, Air Costa and Jet in the previous decade, the list of failed Indian airlines is long. But now one of the dead airlines is rising.

The Jalan Kalrock Consortium, the winning bidder for Jet Airways which had entered the insolvency resolution proceedings in 2019 after nosediving due to mounting debt, has deposited Rs 100 crore in the grounded carrier today, taking the total investment in the airline to Rs 350 crore. It’s a small but definitive step towards the revival of the airline. The new promoters hope to get the control of the airline before the end of the year and have it up and running in 2024, the consortium said in a statement.

To be sure, the resolution plan has yet to be implemented and there are lingering legal issues between creditors and the new promoters, the UAE-based businessman Murari Lal Jalan and UK’s Kalrock Capital Partners. The National Company Law Tribunal had approved the resolution plan submitted by the consortium in June 2021. The consortium has taken one step forward by depositing the entire stipulated amount of Rs 350 crore into the airline.

The revival of Jet Airways is just what India’s aviation sector needs when it is heading towards a consolidating duopoly.

The emerging duopoly
While big airlines are going bigger, small ones are shrinking further. Go Airlines India Ltd. stopped flying in May after it went belly up, blaming failing Pratt & Whitney engines. Its revival is in limbo as it struggles to attract funding and hundreds of pilots leave the insolvent airline. No-frills SpiceJet Ltd. is also under pressure after reporting losses for the past five years. Though it has grown rapidly, Akasa Air is too small as of now and has recently seen sudden exit by 43 of its pilots who left without serving the notice period. Many will see it as an effect of the emerging duopoly which leaves less space for smaller airlines to maneuver.

IndiGo and Air India are set to control the bulk of India’s aviation market, while most smaller rivals struggle to stay afloat in the notoriously competitive market. IndiGo, India’s biggest carrier with a market share of nearly 63%, is poised to capture more passenger traffic with a record order of 500 Airbus SE. planes, due to join its fleet from 2030. Air India, the country’s No. 2 airline, also made a giant aircraft deal. It will grow bigger with plans to subsume Vistara — currently co-owned by Tata Group and Singapore Airlines Ltd. — by next year, provided it clears antitrust concerns raised. Air India is also acquiring AirAsia’s local unit and merging it with Air India Express. The Air India group holds nearly 25% market share. A consolidating duopoly makes it even harder for smaller players to operate in a sector which is already notorious for low profitability and several other challenges such as jet fuel prices and fluctuating demand.

Soaring prices
The most visible impact of the duopoly is on domestic ticket prices. In India, ticket prices, which have long been known to be dirt-cheap, are rising.

Airfares on India’s busiest route, Mumbai–New Delhi, were 23% higher during January through August than 2022, according to Thomas Cook India and SOTC Travel. India also saw the highest airfare surge — 41% — in the region in the first three months of this year compared with 2019, a study by Airports Council International Asia Pacific found.

The government had urged the airlines to keep prices in check, especially on routes operated by Go Air which went out of operation in early May.

Hardened domestic air fares under a duopoly will ultimately hit demand as consumers will try to fly less and only for essential activities. India has been creating aviation infrastructure at a breakneck speed, building airports in smaller cities and putting them on the aviation map. The government aims to make air travel accessible for the common people. But that will not be possible without cheaper fairs. In such a scenario, the revival of Jet Airways will mean a welcome addition to India’s aviation sector.

  • Published On Sep 30, 2023 at 08:16 AM IST

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