India has been the fastest growing aviation market over the last four years. Along with telecom, the aviation sector has symbolised the successes of liberalisation — with a visible impact in terms of the entry of a number of players and opening up of access to flying, besides ensuring a pan-India telecom coverage. But the recent turbulence in the domestic airline industry — manifest in the troubles of the full service carrier, Jet Airways, which has been forced to ground several of its aircraft due to its inability to pay rentals, and a shortage of pilots in the case of market leader, Indigo — threatens to derail that growth. But unlike the telecom sector, where there has been a consolidation with the merger of Idea with Vodafone, it is disturbing to see the near collapse of a marquee brand like Jet which had introduced service standards alongside Kingfisher, which folded up a few years ago. This is especially so when fuel prices on an average have been relatively low in an industry where, even globally, many big carriers have struggled to remain successful consistently.
It can be argued that, more than the policy environment, the airline has been weighed down by management issues and the seeming reluctance of its promoter, Naresh Goyal, to exit in order to enable either its partner, Etihad, or a potential investor to gain control based on a resolution plan finalised by the SBI-led lenders. It is easy to push a listed airline company such as Jet on to the bankruptcy route — but clearly, a different set of rules applies to this and the telecom sector. For the national carrier, Air India, with a debt burden of Rs 55,000 crore, the government has provided interim support, a sovereign guarantee and loaned funds from the National Small Savings Fund, helping it to keep flying while keeping alive another state-owned entity, BSNL, in the telecom sector. Now, what the government should do is to further open up the sector, considering the huge potential boost to infrastructure and the impact on tourism and the services sector, and its promise as an employment multiplier.
At a time when the biggest challenge is creating jobs, it is bad optics specially in an election season, to let another firm go under in this manner. It is worth reminding the country’s mainstream parties that India’s most competitive sectors are the ones which have delivered the most to customers and helped fuel growth.
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