What are the Headwinds Indian Aviation Sector is Going Through | Indian Aviation Sector-All You Need to Know

Recently, Akasa Air has commenced its operations while Jet Airways is about to resume its operations. The entry of these 2 players marks the signs of intensifying competition in the Aviation Industry. Also, there are certain issues that Indian Aviation Sector is going through. So, let’s discuss Indian Aviation Sector in detail in this article as we move forward.

1) Akasa Air:

• Akasa Air is backed by Marquee Investor Rakesh Jhunjhunwala, who owns around a 40% stake in the company.
• Akasa Air will hir 350 employees comprising Cabin Crew and Pilots.

2) Jet Airways:

• In 2019, Jet Airways needed to shut down its operations due to a financial crisis, and finally, the company is making a comeback this year.

Benefits of Entry of Akasa Air and Jet Airways Players in the Aviation Industry:

• The benefit to Economy: Employment Generation for the company.
• The benefit to Consumers: With Increased competition, flight tickets might get reduced.

Problems with Increasing Competition:

• Problems with Existing Airways Companies like Indigo, etc.

3) Case of Spicejet:

• Credit Suisse filed a case against Spicejet as the company owes around $24 million to Credit Suisse. The case reached the stage where Credit Suisse took permission for winding up the company.
• Later, Spicejet went to Supreme Court and managed to save themselves from getting the wind up as Supreme Court urged both the parties to settle the dispute outside the court.
• Besides this financial issue, a police complaint was filed against the MD & Chairman of Spicejet Mr. Ajay Singh by Mr. Amit Arora for the case of fraud/cheating. Mr. Ajay Singh promised Mr. Arora for giving 10,000 shares for any service provided by him. The company has declined any such promises.
• Spicejet has still not announced its Q4FY22 result because of some ransomware attack issues.

4) Air India:

• Tata-backed Air India is offering Voluntarily Retirement Scheme (VRS) for its permanent employees who ages above 55 years or who are in service for more than 20 years.
• For Cabin Crew, Unskilled and Clerical forces can apply for VRS who ages above 40 years.
• The benefits of this VRS for the employee will be provided with an Ex-Gratia amount along with some other additional benefits.
• As of 2019, the employee count of Air India was around 9,956 which is currently around 10,000.
• As per the last update, around 40% of the employee have opted for this VRS scheme.
• The company aims to reduce the total headcount and acquire new talents.

5) The Interesting Case of Indigo:

• Linked with the hiring process of Tata-backed Air India, there was an interesting case with Indigo, where its employees took a mass leave on 2^nd July 2022 and as per the news reports, it was believed that this was mass leave on account of participating in Air India Recruitment Drive.
• Indigo against this case took some actions to look into this matter.

6) Emergency Landing:

• In the last 45 days to 60 days, there are several cases of Emergency Landings by almost all the aviation companies.
• Reasons for such emergency landing were quite comical ranging from finding a bird in the cockpit to broking of windshields, and others.
• Directorate General of Civil Aviation (DGCA) also entered into this matter and organized a spot check which can also be considered a random investigation where they found that there was Unqualified and Insufficient Staff who were giving Green Signals to the Quality Checks, and Air Technician Engineer (ATE) who is another personnel which gives the signal for the quality checks, also gave its green check, due to which flights were facing such issues.
• As a result, DGCA started a 2-month-long special audit of airlines amidst rising technical issues.

7) Aviation Industry-Operating Cost:

• The operating cost of the aviation sector companies is much larger, currently even more than their revenue.
• Recently, the company went through 2 setbacks i.e., fuel setbacks and another setback caused due to the Covid-19 pandemic.

What’s Ahead:

The recent emergency landing and other technical issues in the Indian Aviation Industry might be due to operating cost cutting by the companies. The sure result will be available once the audit of DGCA completes. Amid the current scenario, the newcomer or the company making re-entry i.e., Akasa Air, Air India, and Jet Airways may come up with some new changes in its operations. Currently, Indigo owns over 50% market share in the Indian Aviation Industry, and with the arrival of Akasa Air and other players, it will be interesting to watch how things develop in the sector.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.