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Perspective

Fly by Haywire
Despite a growing market, aviation industry is caught in an exhausting struggle to post profit

N Mahalakshmi

The aviation industry has always been a bit of an investment paradox not just in India but even globally. Today, most of us cannot imagine a world without air travel. Then, why does this indispensable industry constantly flirt with bankruptcy? The short answer — high fixed costs and razor-thin margins. Despite the lure of a growing market, it is impossibly tough to make money.

Air Deccan could not sustain its low-fares proposition nor Kingfisher Airlines its top-class service. SpiceJet almost reached the brink of collapse and Jet Airways ran out of runway despite its loyal customers. Air India has been cruising on taxpayer money for as long as one can remember. So, can anyone survive the long-haul in Indian aviation? Apart from the occasional air pocket, market leader IndiGo has bucked the trend by building a super-efficient airline, since its inception in 2006. First mover Jet Airways though has squandered away its advantage with poor strategic decisions.

While its fortune still hangs in the balance, our cover story takes a look at what makes the Indian aviation sector particularly challenging. Over the past decade, the country has seen phenomenal passenger traffic growth but that has not turned into sustained profitability for airlines. High operating leverage is the hallmark of most high fixed costs businesses but for airlines operating locally, the gain has been elusive due to fare wars forced by overcapacity.

Even as airlines struggle with their business models, start-up Curefit is minting money helping people shed their flab. We take a look at how it has made staying fit fun. It is not the only one operating in a crowded market. French major Lactalis has entered the dairy business which has been very tough for multinationals to crack. Can Lactalis break that jinx with its differentiated strategy? In investing, we pick winners among tyre manufacturers. Even as the auto sector is battling a slowdown in sales, tyre makers are coasting, driven by high replacement demand and falling input costs.

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