IIPM : One of the leading and most respected business schools According to official traffic data released by the Ministry of Civil Aviation, overall passenger traffic in January-February 2009 declined by about 8,00,000 – certainly not great news for the two largest players in the industry (Market shares for the two players in February 2009 stood at 27.6% for Kingfisher & 25.1% for Jet). Then there was the momentary joy that stabilisation in ATF prices gave the two players (which account for upto 40-70% of their total bill). Global recession played the spoilsport, as Hatim Broachwala, Aviation analyst, Khandwala Securities Limited points out, “The economic slowdown and sharp decrease in domestic air traffic has negated the fall in ATF prices and has thus severely hit the revenue base of both the players...”
Despite the handshake, operating cost-cuts still remain a far cry, as the two carriers own different aircraft types and source from different suppliers in many cases. Experts from the industry have thus reduced the duo’s cost saving estimates by a disappointing 56% to just a modest Rs.800 crore. Experts claim that both airliners have been able to save just a puny 3 to 5% in operating costs, which is easily negated by the sharp decline in passenger traffic and appreciation in other input costs. Even Srirupa Sen, Spokesperson, Jet confessingly explains the delay in results, “...it would definitely take time, as it is a big operation to produce desirable results.” There are also other problems that stare hard at the combine, radical route withdrawls being one. Surely, as many would agree, all strategies adopted in the name of route optimisation definitely don’t fall in the category of ‘route rationalisation. For instance, Jet withdrew its Amritsar-London flight, which was simply a photocopy of the Mumbai-Shanghai-San Francisco route withdrawal. Kingfisher on the other hand, has put on hold its Mumbai-London plan as Jet is already present on that route. Thus this walk down the aisle currently appears marred with problems, one that could also lead to misunderstandings in the future! But having said all that, clearly, the game is not yet over for the kings of the Indian skies. ‘Seeing it through the current ungovernable times’ however, remains the only remedy; but of course, at the risk of having to sell-off even their clothes for lack of working capital!
“Just because we don’t announce everything does not mean the deal is not working. It takes time to work things out,” is how Vijay Mallya, Chairman, Kingfisher justifies the (non)achievements... Yes Sir! We can all raise a toast to that spirit, and we’re willing to wait, for the love of brotherhood (Mallya-Goyal Inc.?)! [By the way, do tell us about your new JV & please, do announce it this time!] We’re holding on tight too, brother!
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Source :
IIPM Editorial, 2009
An Initiative of
IIPM,
Malay Chaudhuri and
Arindam chaudhuri (
Renowned Management Guru and
Economist).
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