The days of national airlines are over: Why flag carriers must be shut down

Companies News

Malaysian Prime Minister Mahathir Mohamad told reporters he's studying whether to sell, shut down or refinance Malaysia Airlines Bhd., the troubled national carrier. A decision needs to be made soon. In 2018, the perpetually money-losing airline accounted for about half of the $1.5 billion in losses suffered by its parent, Khazanah Nasional Bhd., Malaysia's sovereign wealth fund.

On purely economic terms, Mahathir’s decision should be easy. In 2014, following the loss of planes and lives in the MH370 disappearance and the tragic downing of MH17 over Ukraine, Khazanah announced a restructuring intended to make the airline profitable by 2018. It’s failed for one central reason: Malaysia Airlines remains a state-owned flag carrier, slow-moving and burdened by political expectations. At a time when low-cost airlines offer a perfectly adequate and more competitive alternative, Malaysia isn’t the only country that should rethink whether it really needs a national airline.

The concept of a flag carrier dates back to the establishment in the mid-1940s of the International Civil Aviation Organization (ICAO), a United Nations regulator. Every nation was given the opportunity to operate international air services. Some countries, including the U.S., chose to let private companies do the flying. Others decided to establish, subsidize and protect flag carriers, even to the point of restricting competition on key routes.


 Those airlines had goals other than profits. For decades, according to Brian Summers at Skift, "nearly every national airline within 12 hours of New York flew to John F. Kennedy Airport, or wanted to -- whether the flights lost money or not."

Jet will re-emerge as a robust airline: Goyal, Etihad CEO in joint message

Companies News:

Jet Airways and Etihad Airways are working together on a resolution plan to make the airline robust and viable, the two airlines said in a joint statement .
The communication comes in the backdrop of lessor actions to ground planes and threats from a section of pilots to stop flying over salary delays.

“Jet Airways, its principal shareholders, including Etihad Airways, and key financial stakeholders are working towards the finalisation and subsequent implementation of the bank-led provisional resolution plan (BLPRP) to ensure the carrier emerges as a financially strong and resilient airline. The approval of the BLPRP by the board of directors of Jet Airways last week was an important step in this direction,” Jet Airways Chairman Naresh Goyal and Etihad’s Chief Executive Officer Tony Douglas said in a joint statement.

“We are confident that once the BLPRP is finalised and implemented, Jet Airways will re-emerge as a viable and robust airline to reclaim its rightful place as the airline of first choice for its customers,” it said.

The statement comes four days after the extraordinary general meeting to approve the increase in authorised share capital and conversion of debt into equity. While Goyal skipped the meeting, Etihad abstained from voting on the resolution. Etihad, which owns 24 per cent in the airline, is also laying stiff conditions to infuse fresh capital. The Abu Dhabi-based airline had earlier demanded stripping Goyal of all his powers and also wants a right of first refusal and waiver from the open offer.


 Jet Airways faces a cash crunch leading to defaults in lease and loan payments. On Saturday, the airline informed the stock exchange that lessors had forced the grounding of two additional aircraft. The airline is also negotiating the early return of some of its leased planes because of fund shortage. Meanwhile pilots are also getting impatient over salary delay...Read More

Indigo crisis: India facing pilot shortage; 2,000 more needed this year

Economy & Policy:

The cancellation of over 30 flights by IndiGo has bought the growing shortage of pilots to the fore, especially when airlines are expanding their fleet.
According to industry estimates, more than 100 new planes will be added in the next 12 months, a bulk of which will come from IndiGo alone, currently adding nine planes every month. As a result, around 1,500-2,000 additional pilots will be required in 2018-19 to fly new aircraft and tide over the existing crisis in the cockpit.

Despite more flights in operation, the number of additional commanders being recruited is slowing down. Aviation industry estimates the number of additional commanders recruited by carriers fell by around 10 per cent in 2017-18 over 2016-17. This was despite domestic carriers scrambling for more expatriates to make up for the dwindling pool of qualified home-grown commanders.

According to CAPA Research, the country has over 7,963 pilots and will require an additional 17,000 pilots in the next 10 years, of which 9,000 first officers will be upgraded to commanders.
IndiGo currently has 3,100 pilots on its payroll. The carrier constitutes for 38 per cent of pilots recruited by domestic airlines. It also has a domestic market share of 41 per cent and is planning an aggressive overseas flightpath. It has over 1,250 captains, which effectively constitutes for over 31 per cent of the 4,000 commanders in service.


According to an airline executive, the ballpark figure of five to six commanders and an equal number of co-pilots, or a total of 12 per aircraft, is needed. “It also takes four to five years for a pilot to become a commander,” he said.