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Akasa AIr has been in the air for the last 1 year but Akasa Air Crisis has come just in time to spoil their anniversary celebrations. In just a year Akasa acquired close to 5% market share. It is also the 5th largest airline carrier in India. In the wake of Akasa Airline Pilot quitting Akasa is suing pilots for leaving the company without serving a notice period. If this crisis isn’t resolved soon then Akasa may have to shut down operations. In this video, I discussed why airlines fail in India, why airlines lose money, why airlines are not profitable, why airlines don’t make money, and so on. A few months back, Go Air had also gone through similar problems and filed for bankruptcy.
The biggest basic costs of running an airline are humungous. The first basic cost is the cost of the airplane itself. Akasa is using Boing 737 Max flights, and the cost of each flight is 800-900 crores. This is not he major expense. Fuel cost is the major expense for airlines. After this maintenance costs, pilot and cabin crew salaries, insurance costs, customer care, administrative costs, and finally publicity and marketing costs. Taking all these costs into consideration we can say that running an airline is a capital-intensive business. This is the first insight into aviation industry problems for business students. 3 issues that are beyond an airline’s control in the aviation industry are pilots, faulty aircraft, and situations like COVID-19 or the Russia-Ukrainian war. Akasa Air has been impacted by the first issue which is pilot poaching in the aviation industry.
This is because their competitor Air India has recently placed an order for new flights which are of a similar type as the ones operated by Akasa Air. Because of this, Air India is targeting the pilots from Akasa. This leads to Akasa Air flights getting canceled. Akasa Air canceled fights amount to up to 20% of their total flights. With the already high costs of running airlines. Akasa Air also has to deal with the trouble of canceled flights because of its pilots quitting.
The second problem faced by Airlines is the faulty engines. Go Air went down because its Engine partner Pratt And Whitney didn’t service the engines on time. The third issue is about external events like Covid 19 and the Russia-Ukraine war. When COVID hit, airlines saw a drastic decline in their business. Because of this the Airlines across the world issued notices for early retirement of pilots. Last year only 993 pilot licenses were issued in India and the years before that were not very great either. The Russia-Ukraine war led to a rapid increase in fuel prices which also increased the costs for airlines.
The reason why Akasa Air pilots are moving out to new opportunities is that pilot training is a tedious and long process. It takes a lot of money and time to train a pilot. Hence, when these pilots are not paid well by their company they always have the option to move to the next company that gives them a better opportunity. The second thing to consider is that the failure of one competitor is not always another’s profit, Most of the time, the entire industry or sector suffers when one major industry player goes down. Hope you find this video helpful, see you in the next one.
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About Me
I publish meaningful and valuable content on this channel. My aim is to make business news more accessible and easy to grasp. If you find my videos informative and insightful then make sure to subscribe and leave a comment. I’ll see you in the next video
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0:00 - Intro
1:03 - Biggest Airline Expenses
2:13 - Pilot Poaching
3:19 - Faulty Aircraft
3:44 - Covid & Russia-Ukraine War
4:35 - Why are Akasa Pilots quitting?
5:25 - Suffering Ecosystem
6:19 - Solutions
6:52 - Outro