After telecom, time for a battle in the sky?

The airline is one of the most affected sectors if not the biggest from the covid pandemic. With countries closing their borders and airports, the airline industry came to a screeching halt. With the vaccination drives picking up speed and gradual opening up of borders, airlines are slowly coming back to action.

A lot has happened in the airline industry in India during the pandemic. Jet Airways found a new owner, Tata Group acquired Air India, Go First filed for the IPO, and ace investor Rakesh Jhujhunwala picked a significant stake in the new Akasa airline. With all these developments, the Indian airline industry is ripping for a battle.

Currently Indigo is the biggest airline in India with a market share of 57%, followed by Tata Group promoting three airlines with a combined market share of 26%. With an experienced management team and deep-pocket investors like Rakesh Jhunjhunwala, Akasa is sure to pose serious competition in the airline industry.

The airline is a very price-sensitive business. While minimum and maximum airfare in India is capped by the Government, Airline companies depend a lot on fuel prices. An increase in fuel price makes the airlines bleed more money. Indians are known for their expectation of a Ferrari-like experience in air travel at the price of Maruti.

Apart from 6 functioning airlines, India has many smaller regional airlines. Jet Airways and Akasa plan to enter service by the next financial year. With 8 national level airlines and many regional airlines, we are expecting a pricing war as we have seen in the telecom sector after the entry of Jio.

Much like the telecom war, smaller players in the possible aviation war will either have to merge with a larger airline or will be weeded out from the equation. Only 3 airlines (or airline group) have what it takes to sail through a possible price war. Apart from Indigo, 3 airlines under Tata Group and Akasa with deep-pocketed investors may survive this possible pricing war.

As travel is expected to pick up, Indian airlines will do everything to get their planes filed. On the other hand, with the current trend of hike in fuel prices, Airlines in India will continue to feel the pain even after the pandemic. It will be interesting to see how airlines handle this possible war in the sky.