What One Airline’s Meltdown Reveals About India’s Economy

The complex schedules that tied together 2,700 daily arrivals and departures at IndiGo, India’s biggest airline, started to fray in November, when a rule mandating more rest for flight crews went into effect. Last week they unraveled completely: IndiGo canceled more than 1,000 flights in a single day and more than a million reservations in all.
The government ordered an investigation into the airline’s practices. How could one company’s breakdown bring India’s whole aviation sector — the third-largest in the world — to a screeching halt?
The answer starts with how little competition there is. IndiGo’s runaway success has allowed it to capture more than 64 percent of India’s domestic market since it was founded in 2007. Air India controls another 25 percent.
The lack of competition in the aviation industry, with so much ownership in the hands of so few, is increasingly typical in India. Critical sectors of the economy, from telecommunications and e-commerce to ports and steel, are each dominated by a handful of jumbo-size companies.
IndiGo’s management apologized and explained that a combination of factors, including bad weather and software updates, led to the cascade of missed connections. Apart from the misery inflicted on its customers, IndiGo’s failure snarled airports across the country and forced the government to temporarily roll back its new safety rule.
The stock market punished IndiGo, knocking $4.8 billion off its value. Then, the government piled on. “No airline, however large, will be permitted to cause such hardship to passengers through planning failures,” the minister for civil aviation, K. Ram Mohan Naidu, said in Parliament on Monday.
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