Go First and beyond: Is Indian aviation going the telecom way?

Aviation often gets compared to telecom, which started a golden egg-laying industry.

Unlike telecom, aviation has alternatives: road or rail transport. A major market with two players is a certain future in aviation now, very similar to telecom

The past few days have swung in a volatile manner for Go First. Things have come a long way for Go First – filing for voluntary bankruptcy, lessors seeking to repossess their planes, the airline being admitted to bankruptcy court, lessors being made to wait longer for their planes, and the carrier repeatedly postponing plans to restart operations.

With Go First out of action, airlines have started adding flights. In the case of Jet Airways, slot allocation had become a contentious issue. It was linked to capacity addition and SpiceJet and Vistara ended up taking Jet Airways’ planes from lessors. It turned out to be a win-win situation for the lessors and the airlines.

The latest reports indicate that Go First is not on the verge of starting. Contrary to earlier indications that flights would resume by the end of May, we are now in an unknown loop, one that often tends to end without a result. Historically, any airline that has suspended operations in India has never restarted.

Also Read | Go First offers pilots Rs 1 lakh in addition to monthly salary in bid to retain them

This is also the closest that we are to fears about aviation gravitating towards a two-horse race – IndiGo commands an over 50 percent market share and airlines under the Tata umbrella have 30 percent, with the rest fragmented among other carriers.

Akasa Air is too small as of now and SpiceJet has been in a financial crunch over the past few years. The question now is how, if at all, the remaining 20 percent of the market will play out.

Aviation often gets compared to telecom, which started a golden egg-laying industry. However, a combination of self-goals, taxation, and low fares killed airlines, leaving behind only a handful, including a state-owned carrier.

Hope of profitability

Indian aviation was growing at 20 percent about a decade ago. The collapse of Jet Airways, the financial issues of SpiceJet, the pandemic, and now the Go First crisis have resulted in muted growth. Amid all this, though, there is a glimmer of hope – and that is around profitability.

Airlines in India are returning to profitability, in line with their global peers, as they go away from chasing double-digit growth to moderating it and ensuring higher yields. Airfares may not be affordable for everyone, but it is better to have an industry that sustains itself than one that records higher passenger numbers and ends up losing an airline periodically.

This, too, has similarities with telecom, where the early days were marked by multiple players and huge losses.

The telecom sector appears to be heading towards two strong companies – Airtel and Jio – as Vi and the two government operators BSNL and MTNL struggle. The country continues to have one of the lowest telecom charges, yet moderate growth continues, along with profitability, without compromising on the future and the expansion of 5G services.

A similar argument can be made for aviation. A look at IndiGo’s network shows that over 300 routes of the 700+ that it operates are a monopoly, with some of them under the regional connectivity scheme. Even the monopoly routes have not led to an irrational spike in air fares.

Unlike telecom, aviation has an automatic check – that of alternative modes of transport.

Sustainable industry is more important than irrational growth

We have seen periodic failures in India. This leads to job losses and, at times, long periods of unemployment. While the sad reality of job losses and company closures is true across industries, aviation is a specialised industry and many people in the workforce have skills that are hardly replicable in other sectors.

The focus more often than not is on pilots and their salaries. However, there are other staffers in every airline. Like pilots, aircraft maintenance engineers too have limited options beyond airlines.

Fewer airlines but those that are well capitalised and have a countrywide expanse would mean stable operations for all airports, healthier and profitable airports, and better employment opportunities.