When Jawaharlal Nehru made his freedom speech 61 years ago, he took an oath to eradicate poverty, disease and inequality. And it made sense. But after 61 long years of globalization and scientific revolution, it doesn’t make much sense for the prime minister of India to pledge the same.

What are 9 GDP growth and IT boom if we can’t make the ends meet for a middle class Indian? And the metaphor holds true in more than one sense. There are 80 domestic airports and about 11 carriers in the country. So technically and ideally Delhi should be 2 hours away from Mumbai. But in reality, for the middle income group it’s still 2 days away.

Despite the wallet burning prices of air tickets, the air traffic went up by 25% between 2003 and 2005 and an overall 19.1% between 2003 and 2008. This could only mean either the average spending capacity of a common Indian has really gone up like we all like to believe, or it’s yet another stunning evidence of that gap between the riches and the rest which we’d choose to stay ignorant of.

Considering that about 97.2 % of the population falls in the middle and low income slabs, it’s blasphemous ignorance to draw conclusions like the former (unless we argue that the income tax records should not be taken so seriously at the face value but that’ll open the door to a series of complex politico-economical revelations that the country can’t handle).

Is the middle income group not able to afford flying or is flying not affordable for the middle income group?

Up until a decade back, flying was considered a privilege reserved for suit clad Tatas and Birlas. But then with the emergence of low cost carriers,(and low cost suits
) air travel moved from unthinkable to far yet reachable for all. Just when the country was beginning to bask in the hopes of India flying, the fate of LCCs ended in mergers and acquisitions. The government seemed to be keener on promoting the aviation sector as a potential source for revenue generation than as upgradation of the transportation service for the common man.

At the same time the concoction of high air-traffic brought in by the LCCs ,the copious financial liquidity due to seemingly accelerating economic growth, the fierce competition and fresh business school educated minds led to sprouting of a number of new airports and modernization of existing airports in line with the international standards. Besides the big Indian players expanded recklessly in a greed to grab as much market share as quickly as possible. But they made the mistake of over estimating the growth pace of the still nascent aviation industry in a country like India whose population is predominantly monetarily conservative (read: constrained) middle class.

The absence of LCCs resulted in considerable reduction in domestic air traffic. Further unfortunately the global economic crisis followed, melting big and small companies down on its way. Not surprisingly the corporate world freaked out and adhered to the only handy back up solution known namely cost cutting thereby drastically cutting down on air travel expenses. India, traveling by air for pleasure is not yet popular among the general public. The corporate population and the international travelers constituted a major chunk of the flight passengers. As a result the air traffic dropped further down to a new low. The number of flights in the Mumbai-Delhi route, the busiest in the country, was reduced by half.

Pessimism set in when the largest private airline giant Jet airways (over) reacted by impulsively pink slipping employees overnight. Then the government stepped in and deferred the oil company debts. This followed by the fall in fuel prices gave a new hope. Although the fuel prices were slashed by 55%, the airlines were quite rigid in letting the impact reflect on the air fare. The fuel surcharge alone constitutes more than 45% of the taxes levied on the basic airfare. But the airline giants in their desperation to gobble up every bit, hardly relaxed the stiff prices. On the contrary the budget carriers stepped up and brought down the fares once again posing an undesired competition to the greedy giants. (No I'm not an ardent supporter of LCCs I'm just anti-Giants)

But then within a few days, the offers were withdrawn and prices hiked (abruptly) further more. It doesn’t take a genius to understand that once a seed is sown it takes some time to sprout results and longer to bear any fruits. But surprisingly and suspiciously all the airlines quickly withdrew their offers and returned to the original price simultaneously. When the credit crunch crushed the economy hard, we fell short of money to meet the estimated cost for modernizing the numerous airports and ended up collecting additional user development charge for meeting the shortfall.(rightful begging) Then they complain of the load factor not increasing despite slashing prices.

Mistake number 2 is elimination of the LCCs which is the result of the aviation sector’s misunderstanding of the needs of the Indian Market.

Any industry should have a strong domestic base for long term sustainability. Ours is still a developing economy that values worth and utility of any product over luxury. LCCs basically aim at providing a little more than the indispensable at affordable costs, which is a good business model for attracting the domestic market. Business class lounges and world class services are accessories that only the elite could relate to but increase the operating costs. When the economy slowed down, the international market on which the Indian aviation sector was built let them down and naturally meeting these high operating costs became a burden and they are resorting to desperate measures which are not helping. In short, the operational model of the Indian airline carriers lacked sustainability and that’s what failed them today.

So ultimately the carriers are flying at the same revenue for a reduced cost and for once, not at the expense of working class tax payers but at the expense of the haves and the less haves in indispensable emergency. The working class has returned to railways with no hard feelings and the prime minister is still pledging to remove disparity, poverty and disease.

Labels: econolog, lifestyle, opinion, social concern