Stricter monitoring & better data analysis by DGCA can avert surprises in airline business

The DGCA can at least analyse the data at its end and show cause airline before it announces the suspension of operations and not after the damage has already been done.(Representative image)

One of the ironies of bureaucratic functioning is the penchant for the status quo displayed by incumbents. Once a policy or system is decided – more often than not forced by circumstances or an extraordinary event – it remains unchanged even if the original factors that led to the formulation of a policy have radically changed.

The case of the Directorate General of Civil Aviation (DGCA) seeking information on a monthly basis from airlines on key performance parameters is no different. All airlines are currently obliged to submit data pertaining to the number of flights operated, passengers carried, load factor, on-time performance, number of complaints received and redressed, etc. Airlines have been religiously submitting data relating to these operational aspects.

The DGCA on its part collates the information received, adds a bit of value like totalling the number of passengers carried by all airlines, preparing a ‘merit’ list of how various airlines have fared on market share, on-time performance, load factor, etc. This is then shared in the middle of the following month with the media, which on its part regularly publishes reports highlighting which airline has cornered how much market share, who has topped on on-time performance, etc. If the DGCA has remained stuck with a standard format for years, the media has been equally consistent with reproducing DGCA releases with little or no analysis.

A perusal of a recent DGCA report shows another value addition, if it can be called so. The DGCA, in the remarks column, indicates names of airlines that have shown improvement and those which haven’t - increase and decrease.

Obsolete Monitoring Format

So if there is a substantial swing – positive or negative – noticed, an analysis to determine the reason becomes imperative. It is here that all involved are failing. The DGCA just adds in the remarks column which airlines increased their respective market share and which airlines lost out. The remark fails to convey the real picture. Was the gain/fall one-off or has been consistent over a few months?

The aspect of falls cannot be ignored by the regulator. If the fall is due to a reduction in capacity deployment by one airline (as it happened in the case of Go First) and is not offset by another airline, it should become a matter of concern. An analysis is required not just to determine why the airline concerned has reduced capacity deployment but also because less capacity in a growth-oriented market means a greater scramble for seats and resultant higher fares – like we are witnessing now. It is the government’s responsibility to ensure that capacity deployment is commensurate with demand and that passengers aren’t exploited by the airlines.

Multiple Stakeholders

The million-dollar question is whether the information submitted by airlines is being optimally used. Is there a need for expanding scope with larger objectives necessitated by emerging developments in mind? The DGCA will get a bigger picture only if it realises that passengers are not the solitary stakeholders for airlines. Stakeholders go way beyond the air travellers. The collapse of Kingfisher and Jet Airways could have been subjects of case studies for drawing lessons but the DGCA perhaps faltered and felt that the system of monitoring currently in vogue doesn’t need a change.

In the recent case of Go First, not only was the DGCA caught unawares prompting it to issue a show cause notice to the airline but Indian Oil woke up to encash bank guarantees only after Go First publicly announced the suspension of operations and approached the National Company Law Tribunal (NCLT) for voluntary insolvency. Banks, which had lent money to the beleaguered airline, were equally taken by surprise. Likewise, aircraft lessors are taking the legal route to repossess aircraft to minimise damage to their business.

What do these examples reflect? That there is a pressing need for tighter and wider monitoring of airlines so that the regulatory agency and, through it, the other stakeholders know how the airlines are faring. Considering that there are numerous stakeholders, either directly or indirectly associated, who are interested in knowing how the airlines are performing, the DGCA has a much bigger role to play. The buck must eventually stop at the DGCA, considering that not only all policies and decisions emanate from it but it is also the supreme authority for aircraft registration/de-registrations formality when an airline commences or ceases operation.

The information sought monthly from airlines needs a drastic change so that deteriorating operational and financial trends can be promptly observed and no stakeholder is caught unawares when an airline eventually ceases operations.

Early Default Signs

Additional information that can be mandatorily sought can include financial defaults (if any) on payment of salary to employees, the deposit of provident fund, service tax, loan repayments to banks and lease rental payments. Information on operational defaults, if any, can be about disruption in the supply of aircraft components (like engines in the case of Go First) due to technical factors, non-payment and other supply chain issues, number of aircraft operational and grounded, etc.

While airlines may be hesitant in sharing information on all aspects outlined above, for the sake of transparency and better monitoring, the DGCA must call the shots. Even if all of the information can’t be shared with the public by making part of its monthly release, the DGCA can at least analyse the data at its end and show cause airline before it announces the suspension of operations and not after the damage has already been done.

As a regulatory agency, the DGCA ought to assume responsibility and be accountable. The various stakeholders, including passengers, can’t be at the receiving end perennially because the monitoring system is not only obsolete and inefficient but also because the DGCA is allowing itself to be kept in the dark. The DGCA should therefore use the Go First episode as a case study – even if it has lost opportunities in the past – for introspection and take the task assigned to it more seriously. Effective monitoring and timely data analysis can be of great help in achieving this objective.

Jitender Bhargava, former executive director, Air India & author of ‘The Descent of Air India’. Views are personal, and do not represent the stand of this publication.