For The Fifth time in a row, there is no Airline Company in The B&E Power 100 list. Swati Sharma Writes on why there will be none Next Year too.
Annual profits are a phenomenon unheard of in the Indian commercial aviation space. After recording losses of $6.5 billion between CY2006 & CY2009, the industry continued swimming underwater during CY2010, despite a rather pleasing domestic passenger count of 52 million. While it is tempting to argue that even globally, airlines have not had a happy outing during the past half-a-decade, one cannot overlook the biting truth that of late, the Indian aviation industry seems to have mastered the art of making losses even when the sector globally records positive incomes. Factor this – in FY2010, globally, airlines earned $18 billion in profits. Indian carriers on the other hand, lost $400 million (loss as per IATA). The fact that Indian carriers today carry a debt burden of $13 billion (the highest in Asia) is another worry.
When former Civil Aviation Minister Praful Patel assumed office seven years back, he had declared that India would become one of the largest aviation markets in the world. It has. But only in terms of footfalls. On the profit-making part, it is today a tale of Christian scientists relying on mere prayers. So who’s to blame?
The largest player makes a loss, and you know everything is not good. Worse, it comes as a confirmation that even after years of famine, none in this industry stand a chance of reaching the oasis called the B&E Power 100 list. True: the hallmark of any sector that has enjoyed an overwhelming presence (like BFSI, Oil & Gas, Power, Metals et al) in the list of India’s 100 most profitable companies, during any given year, has been at least the largest in the category that has made a positive margin on revenues. But look at the negative state of affairs on the P&L sheet of India’s largest domestic airline Jet Airways (market share of 24.8% of the domestic market, as of April 2011; DGCA data), and you will understand why there is no airline name in the ranking.
Despite revenues of $3.3 billion, Jet recorded a net loss of Rs.858.4 million in FY2010-11. A big problem for Jet is its accumulated and ever-increasing debt load of Rs.130 billion. In fact, due to debt issues, employee unrest and continuous losses annually, its stock has also been under fire. Today, the company is valued at $800 million – about 62% lower than in May 2005, when it got listed on NSE. The airline then was purely a domestic player. Today, it earns 58.3% of its revenues from international routes – a fact which should have added greatly to its advantage and profitability thereof, given the much profitable long-haul routes. But no. Structural issues have got the better of Naresh Goyal’s brainchild. The problem with the other two-largest Full-Service Carriers is no different. Together with Jet, Kingfisher (20% market share) and Air India (15.4%) made more than Rs.68 billion in losses during FY2010-11. [While Kingfisher lost Rs.10.27 billion, Air India is expected to have lost more than Rs.57 billion.
When former Civil Aviation Minister Praful Patel assumed office seven years back, he had declared that India would become one of the largest aviation markets in the world. It has. But only in terms of footfalls. On the profit-making part, it is today a tale of Christian scientists relying on mere prayers. So who’s to blame?
The largest player makes a loss, and you know everything is not good. Worse, it comes as a confirmation that even after years of famine, none in this industry stand a chance of reaching the oasis called the B&E Power 100 list. True: the hallmark of any sector that has enjoyed an overwhelming presence (like BFSI, Oil & Gas, Power, Metals et al) in the list of India’s 100 most profitable companies, during any given year, has been at least the largest in the category that has made a positive margin on revenues. But look at the negative state of affairs on the P&L sheet of India’s largest domestic airline Jet Airways (market share of 24.8% of the domestic market, as of April 2011; DGCA data), and you will understand why there is no airline name in the ranking.
Despite revenues of $3.3 billion, Jet recorded a net loss of Rs.858.4 million in FY2010-11. A big problem for Jet is its accumulated and ever-increasing debt load of Rs.130 billion. In fact, due to debt issues, employee unrest and continuous losses annually, its stock has also been under fire. Today, the company is valued at $800 million – about 62% lower than in May 2005, when it got listed on NSE. The airline then was purely a domestic player. Today, it earns 58.3% of its revenues from international routes – a fact which should have added greatly to its advantage and profitability thereof, given the much profitable long-haul routes. But no. Structural issues have got the better of Naresh Goyal’s brainchild. The problem with the other two-largest Full-Service Carriers is no different. Together with Jet, Kingfisher (20% market share) and Air India (15.4%) made more than Rs.68 billion in losses during FY2010-11. [While Kingfisher lost Rs.10.27 billion, Air India is expected to have lost more than Rs.57 billion.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
