If you’ve been following this site regularly, you’ll recall we have previously published news about the dire financial situation facing two major Indian airlines. Jet Airways and Air India, two of India’s largest full service carriers, are facing uncertain financial futures after some turbulent challenges. The outlook doesn’t look good, but there may be one option for their survival.
The State of Affairs
Air India is a government-run enterprise. Whenever there is some sort of financial difficulty, the Indian government seems ready to bail them out. While it may be great for national pride to have a national airline, it certainly does not work well in the business world.
Jet Airways is a private enterprise that has just faced bad luck. Interestingly enough, the Indian aviation market is quite robust. There is a healthy demand for travel and given India’s large population, it does not seem like the demand is going anywhere. With plenty of tourist destinations from forts and palaces to the iconic Taj Mahal, international demand also remains high.
However, where there is tourism, there is competition in the airline realm. Some of the major airlines in India that compete with Jet Airways and Air India include Vistara, SpiceJet, GoAir, AirAsia India, and IndiGo.
With a lot of competition, airfares in India have been shockingly low. Naturally, in a tourist-driven environment, the lower the price, the fuller the planes. This put a lot of pressure on Jet Airways and Air India in order to remain profitable.
Many people will be quick to point to Europe. Full service carriers are thriving there despite intense low-cost presence in the form of Ryanair, EasyJet, and Wizzair to name a few. However, Europe is quite different from India.
Aside from the obvious cultural differences, India struggles with a weak rupee in comparison to western currencies. The weak currency has made it difficult for Jet Airways and Air India to pay off their massive bills for fuel and aircraft orders.
Air India especially has been struggling since a merger with Indian Airlines. Since the start of this century, massive expansions in fleet acquisition have plagued the airline. Purchasing new aircraft isn’t cheap and Air India struggled to pay down their debts. Naturally, the debt continued to expand and expand and expand.
Jet Airways similarly has a lot of aircraft on order. Jet Airways also has a very diverse aircraft fleet ranging from 737s to A330s to 777s. This drives up maintenance and pilot costs. Recently, Jet Airways has been looking to fleet consolidation. With 737 Max’s on order to replace 737s, 787s on order that can replace the A330s, and a solid 777 fleet, Jet Airways could, in the future, be a real global carrier.
Yet there remains Air India. Air India is notorious for a subpar product and even more dismal service. Given their continuous bailouts from the government, they really don’t have an incentive to produce a profit.
Why a Merger?
India can only sustain one full service carrier. There is not much of a demand for full service carriers and there is healthy competition from international carriers to India.
Jet Airways also is the stronger airline. Air India has been floundering since 2012, Jet Airways at least was able to turn a profit for a couple years since 2012. Jet Airways also has experienced management behind it.
Air India also hasn’t taken advantage of their Star Alliance partners. Jet Airways, meanwhile, has coordinated service with their partners in KLM and Delta. Jet Airways moved their European hub to Amsterdam and has an extensive codeshare network with KLM and Delta. Furthermore, Mumbai is Delta’s choice destination for resuming flights to India. It is no coincidence as Jet Airways operates a hub in Mumbai.
Ultimately, a change has to be made if a full service carrier remains in India. Jet Airways definitely is in a stronger position and a merger with Air India could be what is needed to save the Indian aviation market.
With plenty of difficulties ahead, India could have the first major airline casualty of 2019. While a merger isn’t the only option to help Indian aviation, a merger wouldn’t hurt.
Do you prefer Air India or Jet Airways? Do you think Air India and Jet Airways should merge? Let us know in the comments!