The International Air Transport Association (Iata) noted earlier this week that though India comprises 2% of global air traffic, it accounts for nearly 25% of global airline losses this year. India is, then, a high-cost environment—slowdown or not.
First, infrastructure imperils airline finances. There are few airports in India, and that too with poor facilities that leave aircraft circling for hours. Yet, their monopoly lets them levy high charges: Noting the 207% increase in airport charges in Mumbai and Delhi over the past year, Iata has put them on a “wall of shame”. Personnel costs are high for similar reasons.
Second, government interference decreases profitability. The high sales tax on fuel, along with government guidelines on what routes airlines can fly, leaves balance sheets bleeding. These have been in place for long, and weren’t going to disappear suddenly.
In any industry this will create a reduction in profits.
Charlie Munger commented a long time ago that in total the aviation industry has created a loss of shareholder value.
The Indian aviation industry needed to go beat this history but handle a couple of its own little issues.