Government policies were not made in a day

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Clearly, it’s a catch-22 situation. Along with their titanic losses, there is the pressing need to pay up on their bills urgently. In fact, sources say that after paying these outstanding bills, these airlines may not be able to drum up adequate support to fund the travel season ahead, which is a great opportunity to make money. There is perhaps merit in the argument that the terminally ill industry needs a bailout package. Without government support, they would obviously be forced to do whatever it takes to survive – form cartels, merge, layoff people and goodness knows what else is in store...

Although both Mallya and Goyal have categorically ruled out that their ‘alliance’ is a cartel, market watchers differ. “Cartelisation like this has not only affected airlines industry, but other industries too, but that remains mostly invisible. As a result, people who lose their jobs do not have the required skill set for being employed elsewhere. So recruitment agencies also face tough times,” explains C.K. Santhakumar, Director, TRITIUM Consulting, Bangalore.

The Indian aviation industry is expected to post losses of over $2 billion in the current financial year, of which Air India alone will estimatedly post 50%, while Kingfisher’s losses are expected to cross $500 million in FY09. Industry growth has dropped from 33% in 2007 to 7.5% in the first half of this year. To reduce losses, the International Air Transport Association (IATA) has even called for reduction in excise duties and other fees.

When bureaucrats in MRTPC go around sniffing for competitive malpractice around Jet and Kingfisher headquarters, they will have to take into account the overall despondency in the air. The situation really looks so black and white and bleak that despite fears of a monopoly in Indian skies, one almost begins to sympathise with Goyal and Mallya. After all, kissing thy enemy is anytime preferable to total extinction, ain’t it?

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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