DGCA’s Financial Surveillance Report Full Of Controversy

Last Thursday, the DGCA (India’s aviation regulator) finalized their 2011 financial surveillance report. The findings of the report are making waves throughout the industry. The report focused on the financial state of airlines in India, finding that financial issues are endemic in the sector, and that this financial sickness is affecting safety standards.

The most controversial part of the report said: “A reasonable case exists for withdrawal of [Kingfisher Airlines] airline operator permit as their financial stress is likely to impinge on safety.” The report also had similar findings about Air India Express (AIX), a surprise considering that AIX was relatively profitable compared to the rest of Air India and was being hailed as a success story by many aviation analysts. I must admit that I belong to that category myself, considering AIX to be a great step for Air India.

Audits of Jet Airways, JetLite, SpiceJet, and GoAir also yielded poor results. The DGCA found “major financial distress issues” that could lead to safety issues. The reports also talks of “some rapid growth issues” about IndiGo Airlines. The audit of Air India is not yet finished.

 

Source: Kingfisher Airlines

When I look at that list, I’m not really shocked. The report seems to list every single Indian airline as under “financial distress.” It’s great that the DGCA is finally figuring this out. The Indian aviation market is structurally challenged. Despite being one of the fastest growing economies in the world, Indian airlines are unable to make profits. This is due to high fuel prices, extremely high taxes, and poorly negotiated bilateral treaties, among other issues. It is excellent that the DGCA is actually investigating these issues before it becomes too late and safety standards crash.

What may seem really surprising is that the DGCA is considering taking the extreme step of revoking operating permits. However, after looking closely at the financial issues that Kingfisher is facing, it may not seem that drastic of a step at all. A post tomorrow will go into more detail about Kingfisher’s financial woes.

 

Source: Wikimedia

With regards to Air India Express, it is surprising how scathing the report is. 2 years ago, the airline was involved in the Mangalore air crash which claimed 158 lives. However, it wasn’t clear to me how poor the safety culture at the airline is until today when I did some more poking around during research. There is shortage of pilots, check airmen, instructors, examiners and cabin crew… The airline is not able to operate its entire fleet due to shortage of pilots. Flight duty time limitation monitoring is carried out manually (unlike most airlines, including its parent Air India, which use computerized systems). Training of pilots is carried out on Jet Airways’ simulator as AI Express simulator remains unserviceable most of the time.”  This is a bad situation to be in for any airline.

Other airlines have been having similar issues as well. Jet Airways, JetLite, IndiGo, SpiceJet, IndiGo, Air India Regional, and GoAir all were found to be experiencing “financial difficulties” and “growing pains” in their operations. Crew shortages, poor quality training programs for pilots and cabin crew, and a lack of important software that can improve safety were found in some of these airlines, among other problems.

Any safety issues are always extremely worrying. However, despite all these concerns, the airlines of India are still some of the safest in the world. The fact that the regulator is being vigilant enough to ensure that these problems don’t become too severe is an extremely good sign.

Tune in tomorrow for a closer analysis of Kingfisher Airlines’ financial problems.