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Monday, June 14, 2021

VK Mathews: ‘Problem of Indian aviation is not the costs, it’s the price’

Typically, airlines in India have not been paying a lot of attention to buying the latest and best technologies.

Written by Pranav Mukul | New Delhi |
November 19, 2020 2:08:27 am
Typically, airlines in India have not been paying a lot of attention to buying the latest and best technologies.

Business travel, severely hit by the restrictions imposed to contain Covid-19, is not expected to reach pre-pandemic levels at least till 2024, VK Mathews, chairman of IBS Software — a software technology firm with airlines and hotel companies as clients — told Pranav Mukul in an interview. Mathews also talked about the concerns in civil aviation industry and the aversion of Indian airlines in making technology investments. Edited excerpts:

Most of your customers are foreign airlines, hotel companies, etc. Has it been a conscious strategy to not get Indian customers or are Indian airlines generally averse to investing in technology?

Typically, airlines in India have not been paying a lot of attention to buying the latest and best technologies. And there are many reasons for it. It’s just that this market has not been very attractive for us. The reason is, how will they be able to use the technology to improve their operation? I don’t think that has been the priority of the airlines in India. Some of them wanted to operate and survive and it’s just a matter of the market maturing for now. Kingfisher and Jet Airways used to be our customers. Kingfisher used our cargo products and for Jet Airways we managed their flight operations and crew operations. Both of them unfortunately went down.

Do you see a ray of hope again for Jet Airways with new investors coming in?

It is unlikely … I don’t know what they will be buying because the airline has a lot of liability and the equipment is not being used, and their aircraft are old. So I’m not really sure. So you essentially inherit a lot of liability.

What are some of the concerns in India’s civil aviation market in your view?

If we talk about India in civil aviation, of course we have great potential in terms of growth. Even in pre-Covid levels, we had less than 300 million journeys including domestic and international. That is nothing compared to the population of this country … And these 300 million journeys are undertaken by less than 50 million people and assuming we are able to get our Indian growth story right, which has unfortunately not been great during the last couple of years, I am still very positive about the growth opportunity.

The problem of Indian civil aviation is not about the costs. It’s about the price. Take IndiGo or SpiceJet: 70 per cent of the cost for an IndiGo or SpiceJet and an airline like Lufthansa operating in Europe is similar, whereas fares in India are 50 per cent of average world fares. There is no way airlines can succeed in this context.

How soon do you expect then aviation industry to recover from the Covid-19 damage?

We should track three things: the economy, the disease and what is happening actually on the ground. If people don’t have money, they’re not going to travel, if the threat of disease is continuing, people will not travel, because it’s not safe. So, there are two endpoints I can visualise. From the epidemiological endpoint, I see recovery from the third quarter of next year (July-September 2021).

But some of the changes are lasting changes. I don’t think business travel will get back to the same level, until at least 2024 because we can … conduct meetings and business remotely, and very effectively. So, domestic will pick up first, then regional, then international and leisure will pick up faster and business travel, in my view will pick up at the same time, but it will not reach the same levels.

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