the maharaja has lost its smile as Air India has been bombarded with problems one too many. The state-owned legacy carrier has been hammered with mounting losses anticipated to cross a heartrending Rs.53 billion in FY 20008-09 along with a Rs.30 billion wage bill forcing the national airline to serve salary forgoing notice to its employees. Air India has also reportedly sought for a bailout of Rs.140 billion from the government with the hope that the government will come to its rescue. But why should the government save Air India? For the simple reason that Air India is not the only victim of the ongoing unprecedented turmoil that the aviation sector is going through. Market leaders like Kingfisher and Jet Airways have suffered losses crossing the thousand mark in the current fiscal. The government has asked for a complete restructuring of the airline and Air India has been directed to operate as a low cost carrier to all its destination except for metros, which have high load factor. “Economic slowdown has made travellers more sensitive to price. The low cost model is likely to become even more attractive in India as airport infrastructure improves and allows for greater efficiencies. Low cost airlines are likely to continue to increase their market share to as high as 65-70% over the next few years,” explains Binit Somaia, Regional Director, CAPA. With its current restructuring plan and the visible sign of economic recovery, the revival of the airline wouldn’t be tough ask and we could once again see the Maharaja smiling away to glory.Ratan Lal Bhagat
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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