Soaring High, in the sky or on losses?
It was summer of 1997, I took an Alliance air flight to Delhi with my Mom, Dad and Brother. Those days online ticketing was not popular, so bought tickets from the Airline Office in the City. Each ticket cost some Rs. 2900-3000. Today, 24 years later, I still get the same sector flight at around Rs. 3500. This amount of Rs. 3500 includes increased Delhi Airport arrival fee. If you can see in 24 years , Airline tickets are hovering around the same cost. Whereas worth of Rs. 3500 in 1997 versus in 2021 is totally different What made it possible or Are we paying the real cost of flying?
Past and Present of Airlines in India
If we see the last one decade for financial health of Airlines in India, we very remember closure of multiple Airlines due to piled losses. Few Airlines names that become past are:
Jet Airways
Kingfisher Airlines
Air Pegasus
Air Costa
Air Carnival
In the presently operational Airlines, none of them is in profit. Rather, most of them are in huge losses. There is no hope of recovery of these losses with the pandemic situation in place. Fact is in pre-covid times, airlines were generating revenue not profit. Most of these operating airlines are struggling to stay afloat.
Airlines industry is a highly regulated industry where a screw change is also accounted in to books and signed by authorized persons. Such highly regulated industry is also subject to multiple factors for operations such as weather, geo-political situation, Human resource lobbies and the like. As per latest available data from DGCA, fuel only cost 37.4% of total cost of operation. Let us take an example:
Example Scenario
Therefore, as per this calculation, with all 187 seats occupied, airline has to charge Rs. 4590 on an average per seat to break even. One fact to consider is DELHI-BANGALORE is considered as profitable sector.
Present system of airline is to increase load at less fare. However, this means lowering margins to an extent that there are no positive margins.
Measure taken by Airlines
Cargo: Airlines take up cargo with usual passenger flight to have additional revenue per flight. With limitations of per passenger baggage weight, Airlines try to use baggage compartment