Once the rising star in the aviation world - India has it seems now taken a back seat with regards to modernizing and expanding its aviation product.
This applies also to the Indian airfreight market which although large, is still treading water.
What will happen to change this?
India’s national carriers come under scrutiny
Recent reports from the Indian press state that the Indian government has set up a probe into the 2007 merger between Air India and Indian Airlines.
The Central Bureau of Investigation (CBI) is enquiring whether the merger process was clean or not.
Furthermore, they are looking at Air India’s purchase of more than 100 aircraft in a four-year period between 2004 and 2008 and why the carrier (had) to dispose of what the bureau sees as viable
and strong revenue routes.
Quite a list of worries for the Indian carriers who should be concentrating on making long wished profits.
Other carriers popped up and took advantage
The business plan presented for the AI/IA merger in 2007 was based on the promise that by merging, both carriers would show healthy profits in the future.
The contrary seems to be the case and other smaller Indian registered airlines have come on the scene and further diluted the AI/IA revenue path.
However - the fault is not with the new carriers such as SpiceJet or the narrow body operator, IndiGo Airlines.
It lies mainly with a misjudgment and maybe subsequent mismanagement of the two combined airlines, which according to Air India’s chairman, has led to a weak and failing Air India.
In hindsight - he thinks that all would have been better off without the merger which led to an unhappy staff moral and high extra costs all round.
Is selling off a stake in Air India a solution?
Some might think so as a new report states that India’s Finance Minister has openly questioned whether selling off the governments share of the national carrier might be a better solution.
It would seem that the list of possible “takers” is so far not that long.
The carrier operates with around 110 aircraft, serves just over 90 destinations with over 400 flights daily.
The government which owns the majority 51% share in AI has often come to their aid financially, but with no noticeable change and which has led to frustration within government circles.
Indian cargo market is shared by others
The airfreight market into and out of India is an important one, but one which is definitely not growing in leaps and bounds, as it should be.
The large cargo hubs such as Mumbai, Hyderabad and Delhi are attractive, if not disorganized. However, the lion’s share of cargo being handled on international routes is going to other carriers
who offer large belly capacity and various direct freighter flights.
So - who would want to take a majority share in the once proud Indian national carrier seeing that up till now almost US$5 billion have been pumped in there by the government.
Too many probes going on, which would make potential buyers very wary of what’s in the bag.
The investigation on profit making bilateral routes which were allegedly handed over to new private carriers at the insistence of some ministers, along with the enquiry into AI’s purchase of over
100 aircraft at a cost of just over US$10 billion in 2005, is not going to help matters.
A small US$16 million profit in 2015, was the only highlight considering it has remained at a loss for over 10 years, whereas its national competitors are showing different results.
Are we seeing the start of the fold-up of another national airline - this time in India?
John Mc Donagh
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