State of the Economy. How will Go First’s insolvency affect the Indian aviation sector?

In the last three decades, the Indian aviation industry has witnessed many airlines, including NEPC, Kingfisher, Modiluft, and Jet Airways, enter the sector with a bang but fail to stay in business for long. The latest is Go First, which in recent months has been facing trouble and has sought voluntary insolvency. What does this latest episode of an airline threatening to go off the radar mean for the Indian aviation industry?

In this episode of the State of the Economy podcast, B Govindarajan of Tirwin Management talks to businessline’s TE Raja Simhan about the impact of airline pack-offs, the financial health of airlines, and more. Govindarajan acknowledges the recurring pattern of Indian airlines shutting down every two to three years, attributing it to various factors.

While in the past, it was seen as a mere alphabetical order, with airlines like Kingfisher and Jet Airways facing financial troubles, the recent closures of major airlines like GoAir have raised serious concerns. They analyse the role of taxes and fuel prices, often blamed for airline failures, but Govindarajan believes that these factors alone are not the main culprits. He emphasises the importance of deep knowledge and understanding of the aviation business, including regulatory frameworks and operational requirements.

While acknowledging that India has a strong foundation of airline knowledge, Govindarajan argues that there is a lack of managerial knowledge and expertise necessary to navigate the complexities of the industry. The absence of significant domestic leasing companies and reliance on foreign lessors also create challenges, such as fluctuating currency rates and a lack of understanding of leasing agreements.

Govindarajan proposes the development of national leasing companies and a unified leasing framework to bring stability and control costs for Indian operators. The conversation then shifts to the issue of aircraft diversity and configuration. They highlight the benefits of operating a fleet with a limited variety of aircraft types, citing examples from Air India and IndiGo. Standardising aircraft types reduces training, deployment, and inventory costs, providing internal economies of scale.

In summary, the episode delves into the recurring closures of Indian airlines, discusses the factors contributing to these closures, and explores possible solutions for strengthening the country’s aviation sector. It emphasises the importance of deep knowledge, managerial expertise, and a unified leasing framework to address the challenges faced by Indian airlines and foster sustainable growth in the industry. Listen in.

(Host: TE Raja Simhan, Producer: Nabodita Ganguly)

______________________

About the State Of The Economy podcast

India’s economy has been hailed as the bright spot amid the general gloom that seems to have enveloped the rest of the world. But several of its sectors still stutter about even while others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is,  businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups. How will Go First’s insolvency affect the Indian aviation sector?

COMMENT NOW