Jet Airways isn’t the only one, 6 more global airlines have vanished

·Five European airlines, along with Virgin America have either shut shop or merged with others in the last year and a half.
·Indian airlines have been offering discounts in their war to win market share; affecting their profits.
·Jet’s grounding is the only silver lining for the aviation industry, as lower competition has increased airfares.

It is not just Jet Airways that is riding out tough times. As many as five other European airlines, along with Virgin America have either shut shop or merged with others in the past year and a half.

Joining this notorious list are Iceland-based WOW Air, Germania from Germany, Denmark-based Primera, Cyprus’s Cobalt Air and UK’s Flybmi, according to a report by CARE Ratings. A range of reasons like failed expansions, rise in crude and carbon costs, and devaluation of the Euro against the Dollar, led to their demise.

However, many international airlines do not face the additional hardships that Indian operators do, like excessive taxation on Aviation Turbine Fuel (ATF). Domestic airlines in India pay 1.4 times the amount international peers do, due to state-level taxes, CARE ratings said, in its report on Indian airlines.

This factor, along with increased crude oil prices and currency volatility in the last two years, took a toll on all domestic airlines in India, not just Jet.

Discounted Growth

Indian airlines have been offering discounts in their war to win market share. And, this has affected their profits as they charged fares that are one-third of what is charged in developed countries, on major routes.

All the three listed airlines posted net losses for the nine months ending 2018-19. Indigo, which has a 40% market share, posted Rs 433 crore net loss. Jet Airways posted a massive net loss of RS 3,208 crore while SpiceJet’s was at RS 372 crore.

Damned if you do, damned if you don’t

The only good news for Indian airlines is its robust demand and capacity utilisation. But it won’t bring in many advantages, since in the Indian market, it coincides with lower airfares.

Jet’s grounding is the only silver lining for the aviation industry, as lower competition has increased airfares and margins will improve.

“Domestic passenger traffic growth during the year would moderate to 8-12%, as fares remain high. With Jet Airways’ entire fleet grounded, it would take considerable time for domestic airlines to make up for the extinguished seat inventory,” CARE says.

And the ability of airlines to keep fares low, largely depends on how crude oil prices will move.

If crude oil prices remain steady, all Indian airlines can post profits by the end of March 2020, all thanks to Jet. Considering that top executives have been quitting the company even as the sale process is on, Jet might have a tougher time getting back in the air.