What Is Causing The Bankruptcy Of Airlines In India

What Is Causing The Bankruptcy Of Airlines In India?


With the ‘Go First’ addition to the long list of bankruptcy of airlines, everyone is forced to notice the trend of these bankruptcies within the airline sector of India. With airlines going down within a minimum average gap of 2–3 years, a question arises: why is this happening? What is causing bankruptcy in this sector? And if this sector is uncertain, then why are new airline companies emerging frequently? 

Along with these questions, a major question also arises: how have other airlines managed to not only survive but to grow as well? 

The airline sector is no doubt an integral part of India, providing a huge chunk to the Indian economy and employment. It is dynamic and ever-evolving as well, with emerging technology and innovation. Then, what is happening here that has led to the downfall of the airlines? 

In this article, we will answer all the major questions arising in readers’ minds regarding the frequent bankruptcies of airlines in India.

The current State of Indian Airlines 

With India securing the third position in the top aviation markets in the world, followed by China and the USA, it is growing rapidly. Even though there are lots of bankruptcies, amalgamations, and buyouts going on between the airlines, they are still robust in the world. 

There is an increase in the number of airports, flights, routes, and more, contributing to the holistic and dynamic growth of the Indian aviation industry

This growth is bringing tons of opportunities for airlines to exploit, but along with that, it is also bringing competition—severe competition—to survive and take over.

What is causing bankruptcy in this sector?

  • Financial management: Airline companies have huge loans on their heads, and their flights are usually on lease. Hence, big airlines often fall victim to financial mismanagement. These companies fail to distribute their resources most effectively and bleed money.
  • Aggressive dollar exchange rates: With US tactics to introduce money into the market to overcome its troubles, other countries, like India, are facing issues. Indian airlines are dependent on overseas suppliers for various machines and technologies; hence, they have to deal in dollars.
  • Supply chain: As in the case of Go First, sometimes there is an issue in the supply chain of important items that are essential for the working of airlines. These issues can take the form of big problems and threaten the workings of airlines.
  • Vast operations: Airline companies dig their graves by expanding their operations without proper planning. To cover more routes, sometimes they choose unprofitable routes with low passenger traffic and suffer a loss in efficiency in overall management.
  • Economic cycles: The economy always goes through an economic cycle with four stages: expansion, peak, contraction, and trough. Many airline companies couldn’t handle troughs because of poor resource management. With low demand and high operation costs, they fail to survive.
  • Cut-throat competition: In countries like this, very few people choose their favourite airlines; the rest of the citizens choose the cheapest price. This behaviour has led to cut-throat competition between airline companies. Those who couldn’t survive this competition have no choice but to dissolve the company.

These are some of the very basic reasons behind airline companies filing for bankruptcy, along with other reasons like government policies, COVID-19, fuel prices, and more.

Why are new airline companies emerging frequently? 

Amidst the bankruptcy and buyouts, new airline companies are also emerging frequently in the Indian market. Whenever any airline stops its operations, its competition and new players want to bridge the gap and instantly gain a major chunk of customers without any big marketing campaigns, making the airline sector a very lucrative market to invest in. In addition to that, there is still a huge opportunity in India, as there is still a connectivity issue between Tier 2 and Tier 3 cities.

Like any other sector, aviation also requires some innovativeness to stand out from the crowd. With the continuously growing population, Indian airlines have a big domestic market as well. If innovative players tap this market, it won’t be a surprise if they turn profitable. 

This is the reason behind the buyouts and introduction of new players in this market. 

How have other airlines managed to not only survive but to grow as well?

Where we can see the failures of big airlines, the success and growth of others are also visible. Other companies that not only managed to survive but were also able to grow exponentially are able to understand this highly competitive market and customer behaviour and act accordingly, like:

  • Efficient financial management
  • Modernization of aircraft with newer, innovative machinery to reduce fuel costs and efficiency
  • Route diversification; to have a mix of domestic and international routes
  • Creating a brand image with excellent customer service
  • Playing on price by charging the minimum possible fares
  • Adapting to the latest market trends and more

Summing Up

With frequent bankruptcies of airline companies over the year, it has been found that there are certain issues in managing the airline companies. It is a rewarding yet very dynamic and evolving market that is filled with cut-throat competition. However, with proper resource planning and adapting to the trend, this can prove to be a very rewarding industry.

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