Regulators have to handcuff cartels Else market failure will persist
Proprietorial control is not practical.
I have been an avid Indigo watcher from its inception. As someone who understands regulation, I completely disagree with the nonsense being put out by Indigo PR.
Govts are smart, they catch up. If govts become impotent or ineffective – the likes of some of our industry leaders will sell the country.
banking, telecom, insurance, fintech, steel, aviation and many other industries – have seen market failure. This really means that inspite of liberalisation – we have concentration of market share. There may be many reasons for this. Capital, technology, political support … even corruption or criminal affiliations.
Concentration of market share leads to dominance. Dominance of two or three players leads to cartel formation. And cartels are not good for the country or for the consumer.
The aviation industry was a four legged race with air india, indigo, SpiceJet and go air. And then Go Air got grounded and SpiceJet got capital starved. Air India was acquired by Tatas. Tata are not a competitor to be feared.
The financial engineering for setting up Indigo was an act of genius – credit for which goes to Rakesh. They had the gal to place the largest order in history for airplanes. They ordered A320 planes (182 seats) for an average of USD 48 million each and those planes now sell for over usd 90 million.
So every core comparative advantage of Indigo comes from this binding order on Airbus. The Indigo game was to destroy competitors by reducing fares. Across the table was a heavily bleeding govt owned Air India. The rest didn’t matter.
But then Rahul Bhatia isn’t the only smart cookie in Lutyens Delhi. Ensconced right in the centre is an even smarter player. Gautam Adani. He figured out that this was a great space. He even managed to forcefit a narrative of synergy with his port business. Adani first bought the airports (the only true monopoly) and then he acquired Air Works – the Airbus company which maintains the aircraft’s from its base in Hosur. He then got into pilot training.
In the interim, the air India crash at Ahmedabad got regulators scurrying to look at Safety and pilot rest hours. Far reaching changes were made. Indigo has been a wheelor dealer type of player. Even during the dispute among partners, Rahul had procured the services of an ex SEBI chairman to navigate governance issues.
But not everything or everyone is for sale. The primary job of a regulator is to ensure that cartels and monopolies don’t have a free run. They are doing their job.
Indigo can fret and fume. He can hire all the corrupt bureaucrats and wheeler dealers.
Indigo will either have to become a law abiding transparent high governance company or sell out.
Why didn’t Indigo set up a pilot academy instead of putting all their resources into building hotels that are privately owned by the promoters ?