Why & what’s so wrong with airline industry

The owner of a prestigious telecom firm once commented ” How to become a millionaire? Start from being a billionaire & then start an airline firm…!!! ” Indeed, his words seem true after seeing the industry in all sorts of trouble & no longer being “in good times”. Here are my views on why this crisis happened with the industry.

The notorious mischief maker

This is one airline which seems not to care about losses..after all it is owned & funded by the government. Losses, inefficiency, strikes, cancellations, etc seem not to mean anything to it. A private airline which is relatively in a good shape has recently accused our “Maharaja” of keeping prices low & giving discounts in wake of rising fuel prices & thus adding to the problems of other private firms, which aim at striking profit & increasing RoI for their shareholders.

Mar“ger

Recent mergers in the airline industry seem to have gone horribly wrong possibly because of lack of synergies right from the beginning itself, inability of the parent to see value in its low cost child, confused positioning after merger, etc.

They kept it simple ,silly

Low cost carriers have definitely stolen the show. They seem to have understood the travelers’ needs better. Business class travelers don’t really need exotic food on a 2hr journey..great food is waiting for them right in front of their desks at presentations/seminars they attend. Economy class travelers are always willing to pay as less as possible. To add to this, the food served during flight, is, to say the least, not the best. The low cost carriers eliminated serving food & thus reduced their cost/journey, reduced tickets & managed to take the limelight away from the Maharajas & the Kings.

The silent competitiors

No one really considered them direct competitors to airline industry but they have played a part in spoiling the party of the airlines. First is the railways (Yes, ironically even this is government owned). Railways have introduced a series of super-fast trains, which hardly stop at any station between the 2 endpoints. Now suppose there is a choice available: 15 hour comfortable,  guaranteed & confirmed journey for Rs 1000 versus a flight of 2 hrs costing Rs 10000, which may even get cancelled at the last moment. Guess more & more people are getting inclined towards the first option.

Second is the development of highly sophisticated video-conferencing solutions over the past couple of years. If you can see a person thousands of kilometers away from you, appearing in precisely the size he would appear if he was sitting right in front of you plus you have the ability to share, edit reports together & do a lot of other things you would do face to face with another person, then the need to travel is definitely reduced. The competition from online collaborative solutions cannot be ignored by the airline industry going forward.

After having seen the issues & the reasons for them, the next question is what is the way forward ? The bosses of these companies are smart enough to carve their companies’ way out of this mess. They would need to accept hard realities & cut down on unnecessary luxuries. The government needs to come out with a holistic, long term & healthy airline policy & not just look at short term solutions of temporarily keeping the dying ones on life support systems.

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