Kerala

Airlines’ loss is Railways’ gain

KOCHI: Higher cost of flying has dented air traffic to a significant extent in the last couple of weeks, which will prove a bonanza for Railways and the road transport sector and enhance their profitability by at least 8-10 per cent in current fiscal itself. The air traffic has already started shifting towards railways and roads due to the affordability factor, according to the Associated Chambers of Commerce and Industry of India (Assocham).

Reckless expansion undertaken by airlines in the past, with introduction of sub-prime flying to attract large traffic from rail and road with a view to generating larger revenues, had not paid airline managements desired dividends as they could not sustain the business strategy. The net result was that air and cargo fares had to be raised by more than 50 per cent in the past, which forced passengers of economic class to opt for rail or road transport, says Assocham analysis.

The fall in prices of crude has yet to benefit the air operators as Aviation Turbine Fuel has yet to be rationalised, sales tax on it remained higher as fuelling an aircraft is a costlier exercise in India. Therefore, air operators have no other option but continue to sustain their operations with existing fares. The economy class air passengers can no longer afford it and the natural option for them is the road or rail transport.

In the meanwhile, the facilities for both cargo loading and unloading as well for passengers, especially in Railways, have been upgraded so much that railway transport has come almost on a par with air traffic with favourable and acceptable fares. In such a scenario, it is natural that passengers who had got accustomed to air traffic in the recent past are now forced to take to road/railway for travel purposes.

The Assocham analysis further reveals that the slowdown which has resulted in large cost-cutting measures in corporate India is discouraging their executives up to middle management rank levels to take to air travel as it involves higher cost. Even corporates in the last few weeks have been opting for road transport for physical movements of their executives until it has become absolutely necessary to move them by air.

The Chamber analysis has pointed out that as a result of introduction of sub-prime flying, the air operators owe so much of money to oil companies which keep on supplying them aviation turbine fuel on credit as they cannot afford to suddenly disrupt the supplies since it requires approvals and permissions which do not come handy to them. According to estimates made by Assocham, airlines in the Asia Pacific region, including India and China, will experience a sharp fall in their revenue by around 22-25 per cent towards the end of current fiscal.

The deterioration in air traffic will continue even though there is a consolidation in the aviation sector, particularly in private sector, as it is highly unlikely that the prices of avian fuel would be rationalised as crude oil will scale upward movement. Even if Railways and roads transport further increase their fares, the preference for rail/road transport will be much more as airlines will not come forward for another bad experience for reintroduction of their reduced fares as it will completely damage their business operations, concludes the Assocham analysis.

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