The Taste With Vir: The rise of consumers, the end of competition in aviation and telecom
In this week’s column of The Taste With Vir, Vir Sanghvi speaks about both the telecom and aviation industry boom and how with the fall of competition, consumers have risen.Updated: Apr 24, 2019 16:01 IST
Have you noticed how so many things in the new India follow the same pattern? They start off with promise, then the government gets involved, ministers exploit the phenomenon for money or power and eventually, the collapse begins.
Let’s take the telecom boom. There is no doubt that, more than any other phenomenon, telecom has empowered Indians. In the days when the government ran telecom, it was a disaster. Getting a phone was a privilege, the lines didn’t work and you had to pay a bribe to the guy who came to install the phone.
Once the private sector took over, it harnessed new technology, made phones available to more people than ever before and empowered Indians. At first, it was only about keeping in touch. But as the Smartphone came along, the marriage of telephony and the internet transformed have we got our news or entertained ourselves.
But, of course, politicians couldn’t stay out. One telecom scam followed the other, there were criminal charges and what should have been a go-ahead sector became a source of shame and scandal.
Now, telephony continues to transform India but the private sector boom is over. Many operators have gone bust, others are making losses and struggling to survive. And eventually (in a couple of years, perhaps) there will be only one profitable giant operator. The services will be good so the empowerment of consumers will continue but the era of competition is ending.
The aviation sector has followed the same pattern. Once the skies were opened up, several private players entered the market. The early movers tended to get it wrong and many went bust but there were enough players with the skill and expertise to transform the sector. The real cost of air travel dropped so much that people who had never before travelled by plane began to see it as a right. Finally, a vast country like India had the airline network it deserved, connecting far-flung places, helping businesses go national and bringing families together. Till the air travel boom began, it was not possible for people to keep their families in one city and find jobs in another. Now, it happens all the time.
But because the skies, like spectrum and the airwaves, are controlled by the government, here too there were massive levels of interference and corruption. Airlines with political contacts spread faster than others. Those without the right sort of contacts (or the cash to hand out) were either kept out of the market or had to fight to survive.
On the international side, politicians took the decision to strangle Air-India and to handicap all Indian carriers by allowing Middle Eastern airlines to operate so many flights out of India that eventually we became the only major nation whose primary air hub was exported. The best way to go abroad was not to fly from Mumbai, Delhi, Chennai or wherever; it was to fly to Dubai and take a connection.
Just as the telecom players collapsed with startling suddenness, something similar is happening in the aviation sector. For all this talk of market forces etc. the truth is that the government controls aviation costs such as fuel (among the highest rates in the world) and landing charges (also much too high).
So while the aviation boom has empowered lakhs of Indians, the airlines themselves are struggling to stay airborne. Even Indigo, the best managed of the lot has difficulty turning a profit. SpiceJet did badly, was sold, and then the new owner found he couldn’t run it profitably and sold it back to one of the original promoters. Air Asia has been the subject of criminal investigations. Air-India, which actually does okay on its day to day operations, has been crippled with huge interest payments for the aircraft that governments decided it needed. (Take away those interest payments and Air-India is not the white elephant of media mythology).
Saddest and most sudden of all have been the collapse of Kingfisher and Jet. There are criminal charges pending against Vijay Mallya so I don’t want to go into those allegations but everyone in the business will tell you that the reason that Kingfisher went bust was not because Mallya stole money from it but because he mismanaged its finances.
So it is with Jet Airways. It has become fashionable now to say that the promoters siphoned funds out of the company. (Did they? And if they did what was the government doing while all this was going on given how regulated the aviation sector is?) Self-appointed aviation experts also say that the airline is worthless and that it has no assets.
This ignores that Jet had the most valuable assets of them all in the aviation business: a great global brand name and highly-trained and competent staff.
It could well have been saved and turned around a few months ago if the lenders had stepped in and been firm. Instead, everyone has been content to let the situation drift until it has reached a stage where hopes of ever reviving it recede by the day.
Instead of turning the airline around and protecting 20,000 jobs, the lenders, the government and every other player of consequence in the sector are behaving as though they are part of a pack of vultures, picking away at the body of a once proud elephant even while it is still twitching with life.
Somebody will benefit --- probably, better-connected airlines or favoured bidders who will enter the fray when the sale price is much lower --- but the Indian passenger will lose out.
I flew from Mumbai to Delhi yesterday. The domestic sections of the airports were half-full and everything had a curiously dispirited air. Fares had gone up by a factor of three or four. Only people who had no choice but to travel were at the boarding gates.
It would be a shame if aviation, like telecom, one of the great achievements of the private sector India were to be mired in filth and controversy. And it would be an even greater shame if the Indian passenger who has gained so much from the aviation boom suddenly found that ticket prices were once again out of reach.
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First Published: Apr 24, 2019 15:50 IST