Airline Over Reach & Blackmail
Dear All: The full service airlines are blackmailing the people and the government by cancellation of flights without notice. Did you know that in Oct-Nov 2008 they had resorted to similar blackmail and the civil aviation ministry had covertly prepared a Rs5000/- crore bail out for them?Please read on:
Airlines Over Reach & Blackmail
S.Narendra
Private full service airlines,under the Kingfisher airline promoter's promptings, have disrupted air services. They are also trying to induce the budget carriers to cut down services to inconvenience passengers and thereby increase the pressure on the government to offer them a bail out.
Public memory is short. Exactly two years back, Kingfisher and Jet promoters attempted a similar move and tried to rally other airlines in their threat to cancel flights and shut down the air services. The two of them wanted to form a cartel, pool aircraft and raise airfares to the peak of Rs48000 per ticket.jet laid off 1000 workers without any notice .Malya planned to sell 25 stake in Kingfisher. This was meant to bolster the then civil aviation Minister Praful Patel's ill-conceived bid to give them a "bail Out " package of Rs5000/- crores.
Today there is a media report that the present civil aviation minister would be meeting the prime minister for discussing rescue package for the mismanaged airlines. They are blaming the government for the aviation fuel charges, particularly education cess on petrol, custom and excise duties on crude imports and POL.Another complaint is that the government owned Air India is offering lower fares and therefore, the private airlines are forced to compete on such low fares.
None of the complaints are new.The ground reality is that the environment for air line business has not changed much since the private carriers entered the business. The price of crude, according to expert forecasts ,were expected to cross $100 a barrel, given the rising demand for fossil fuels by emerging markets and the unstable situation in the middle east. However, crude prices though high, have not touched this peak World demand in 2011 is about 89MMBD,that is 1,4 MMBD higher than in 2010.Opec has surplus capacity of of 5,6 MMBD The global economic down turn has moderated the demand and oil producers have stabilized the oil production. Internationally, new oil extraction technologies such as 'fracking' and discovery of large natural gas fields, are promising to greatly increase the availability of conventional fuels.
When it comes to taxes on aviation fuel many states and the center have lowered taxes on aviation fuel during the intervening period. If we look at the charge that Air India is unfairly competing on the price front, this does not gell.This is because Air India ( or Indian Airlines) has drastically lost market share to competition and is unable to compete against budget airline fares and schedules. Given Air India's internal troubles, passengers have moved away to air services offering more reliable service.
When the private airlines tried to blackmail the government last time, the then Petroleum minister Murli Deora rightly pointed out that the common man needs the relief more than well off air passengers and airline managements. The civil aviation ministry's covert efforts to make out a case of Rs5000/ crore government relief fell through. On the side, the government did bring down the price of aviation fuel and offered some other relief. In the context of present galloping inflation that is affecting the large sections of the people, the mass transportation sectors such as the railways, passenger and goods transport business are bearing the larger burden due to ruling oil prices and deserve relief. This may contribute to bringing down the inflation.
Some puzzling questions emerge. If the private air business was reeling under such severe financial pains, why did the airlines engage in suicidal fare wars? Why did not Malya sell his stake in Kingfisher that was hinted to media in 2008-09? Why Jet did not carry out its threat to withdraw 16 aircraft? Instead of cost cutting, almost all private airlines went on a binge to buy or lease new aircraft and extend networks with borrowed money. Did the lenders, including government banks, who may now be under threat, asses the viability of debtor business plans? What was the civil aviation ministry, with responsibility of oversight over the aviation business health, doing between 2008-11?
No doubt a large network of air service keeps the business economy going. But serious questions should be raised about the case being made out for a government bail out for a private air services that is used by the better off and influential sections. It is quite possible that the demand is a ruse to derail the reported official proposal for a huge rescue package for Air India. Even this proposal appears to be undeserved because such previous rescue packages have made no difference to Air India under official mismanagement. The clout of private carriers is no less responsible for Air India's woes. Needless to say that Air India bail out is also a burden on the tax payer, serves a small section of its employees and the well heeled.
Airline business is mostly started as a flight of fancy and ego, according to a study. World-wide it is a tricky business with high mortality rates .It is also true that over the past 100 years of their existence, airlines industry have made a cumulative loss. Prudently managed international ones such as the Singapore Airline an domestic ones like the South west in USA have managed not to get into red ink .Government bail outs are usually given to officially owned 'flag or national carriers'. Very rarely private carriers have access to such relief from tax payers' money. The American government gave a onetime relief package to most airlines that had to shut or cut down operations in the wake of 9/11 terrorist attack on the World Trade Center in New York.
The prevailing crisis in the Indian private airline business is mostly due to its very big ambitions not commensurate with the Indian market reality. Having grown unsustainably big, some of them now are trying to blackmail the government with arguments that if we fail, the fall out will be nationally heavy. If the government succumbs to their pressure it would set an expensive precedent.
The Director General of Civil Aviation (DGCA) has belatedly woken up to the situation, threatening to take action against airlines cancelling large number of flights .It is difficult to believe that DGCA was unaware of the developing financial crunch inside the industry. Without this watch dog's complicity the industry's over reach would not have come about. Does it now expect the industry to be scared of its bark?.
No comments:
Post a Comment