New Delhi: Distressed airline Jet Airways (India) Ltd. halting its entire operations from Wednesday night for want of funds is set to rattle India’s aviation ecosystem with its adverse impact on other business in the value chain as well as on a large number of jobs. It is also set to have a ripple effect on market competition, fares and the travel experience as rivals struggle to cater to a sudden availability of market share left behind by Jet.
To ensure that there is a plan in place to protect the aviation ecosystem from Jet’s failure and to attempt to bridge the capacity gap, aviation regulator the Directorate General of Civil Aviation (DGCA) will meet executives of airline industry and that of airport operators separately on Thursday.
One of the biggest fallouts of Jet’s collapse is the loss of jobs. Industry executives said it is not the people on the rolls of Jet alone who are hit. “The loss of job of every employee on the rolls of Jet Airways also costs five others indirectly involved in the value chain their work," said a senior industry executive who spoke on condition of anonymity. That would mean loss of work for about 80,000 people considering Jet has about 16,000 workers.
Airport operators and fuel suppliers have also lost a big customer, with Jet’s collapse. The airline which had 119 aircraft in its fleet used to operate about 600 flights a day before the liquidity crisis hit the company last year. These flights vanishing from the sky means airport operators are denied of landing and parking charges and other rental revenue from the airline. These charges account for roughly 10% of the ticket price, the bulk of which is on account of fuel.
One big challenge for the regulators is to ensure that airfare does not go up sharply during summer holidays. Spot ticket prices have already surged sharply in recent weeks. Other airlines grabbing the routes left vacant by Jet is set to impact completion in the market, giving extra pricing power to the dominant player. Surging fares is also likely to have an impact on the travel plans of people.
“Jet’s disappearance from the market is set to have a ripple effect on budget carriers, for whom a sudden scale up of operations will be a big challenge. It will add to working the working hours of their employees and raise their stress levels, affecting the travel experience of customers. This will also have an impact on the image of India’s aviation industry to international travelers," said the same executive quoted above.
For Jet, leaving its own aircraft idle could prove to be costly as it will result in planes developing snags. The company has more than two dozen aircraft. Highly trained staff including engineers leaving the company is another big challenge for the airline to execute a quick turnaround if efforts to rope in a new investor materializes. Industry watchers said that reviving a completely shut down airline is much more difficult than turning around one which is a going concern even if its operations are minimal. Also, foreign airlines are likely to eye Jet’s international routes if India does not quickly bridge the vacuum left behind by the airline.
Jet’s failure is also set to reignite the demand for inclusion of aviation turbine fuel within the Goods and Services Tax (GST), which will help airlines to reduce their tax outgo as the new indirect tax system is without the cascading effect of taxation.
