Aviation Industry : Why Bailout is not a Answer

In last few days we are hearing lot of noise on airlines bailout specifically Kingfisher. I really wonder why suddenly we have so many support and view on it. Rahul Bajaj argued strongly against it, with making strong case of open market and survival of fittest in capitalist economy. Still we can argue that we really not embrace capitalism open heartily and rightly so after seeing Wall Street greed collapse of 2008. But arguing that specific airline required to bailout to save the industry is somewhat flawed. Firstly the aviation industry is not going to collapse. Secondly it will create more opportunity for efficient airlines to expand their horizon but still providing budget airfare. Yes you heard correctly. In respect of so many news and fuss about aviation industry crushed due to government apathy and policy, there is one airline still make a profit last quarter when all other airline makes a loss. The airline is indigo. It is my favorite airline and I found it always on time. So the argument that airlines can’t make profit in present environment doesn’t hold completely true. It can be strongly argue that government policy is not at all industry favor and hampering the growth by high airport landing and aviation tax. That can only be changed when government change it pre-liberalization mindset of looking airline as high class luxury rather than middle class necessity of present India. But government policy only can’t make this industry profitable. Efficiency and economy of operation have to done by industries.

Let take an example of most glamour and now most bleeding airline called Kingfisher and presently only profitable Indigo airline . Kingfisher started with promise of really good time in air with all luxury which customer never asked in first place. Also make to look in big they started expanded pan India without checking economy of scale. Also they brought low cost airline Deccan airline which was diametrically opposite to their own brand. Slowly Deccan airline blended to kingfisher as Kingfisher red but it was no longer was low cost airline. The space created by suddenly disappearance biggest low cost airline was ready for a grab. And many player show interest and one airline stand out of it. It was indigo. Airlines stared without much funfair move strategically and slowly expand it to tier two cities. They expand their connectivity by strategically connecting metro with small city between them and efficiently operating to save take off and landing time. In this way they operated in full scale and also can offer ticket at very low price. Also they don’t require hire beautiful air hostess as the passenger love there punctuality rather a false smile of airhostess.

Looking at the above contrast cases, question arises why we should bailout inefficient airline with the hard earned money of tax payer. If it is dying let it die, it will be good for industry in long run. Let also don’t forget that the owner of Kingfisher still having a good time as he just brought Formula 1 team and also he is owner of IPL team. Oh, I just forget to tell, he also owner of biggest beverage group of India whose beer we all love to drink.

Is Wall Street Protest mark end of Capitalism ?

Last few days has marked with some unprecedented movement across the globe against Wall Street greed. The epicenter of the protest is none other than the place which powerful symbol of successful capitalism for whole world just few years back, the United State of America. A natural question arise whether invisible hand of Capitalism has failed and this going to mark end of Capitalism? Whether we will see a new form of economy which is more human and driven by value rather than greed or we will go back to sixties or seventies form of protective and socialistic economy, reversing of Globalizations. At this movement it is very difficult to tell ball will roll on which direction. But we can try to understand chain of event which has brought us to this situation. First leg of the event was falling of Berlin Wall which mark the fall of Communism and Capitalism as winner. It marked Capitalism and Open economy has a sole winner and way to go for a globe. There was a merit that Capitalism was better than Communism as seen in drastic different in standard of life of west and east Europe. But Capitalism itself has its own drawback. But all its deficiency was ignored and as said Winner takes all, the whole world start embracing open economy and Capitalism without thinking on its negative side which has grown like a monster is recent years. The second leg come when Finance sector which become too strong ask absolute free hand on its running without any control especially in US and Europe. This results in all sort of Financial Product and the whole Capitalism became just a paper money with no real link to productivity and efficiency, the basic essence of real Capitalism. The third leg came when this dream crashed and people come out of there dream. The common people, who believe on those dreams shown by so called financial guru in the market, don’t know what hit them. And the last phase we are seeing presently came when the common man like us sees that their hard earned money has been spent on saving those investment guru who were really responsible for their situation are back to their old business of greed but there situation is still no better. This clearly marks the failure of government across the globe and also misinterpretation of real Capitalism. To understand the real Capitalism we have to go back to time when Capitalism as we know in present form was laying it foundation. It was during the Industrialization Revolution that lay foundation for both Capitalism and Communism. Well Capitalism embrace free market and risk taking ability of individual where as Communism work on collective conscious of a society as whole. Capitalism favors to reward the individual hence drive the greed. But the basic assumption of this theory is that each individual will be driven by his own self interest and collective self interest will do more good to society. The term called invisible hand coined by Adam Smith the father of present Capitalism to define this collective good to society. Probably this theory has some element of truth, but the underlining assumption of unbiased and competitive society really not holds good most of the time in real world. Also during Smith time Finance market was not as strong as we have today. Hence Capitalism meaning during Adam Smith time means industrialization, real investment in resources and real transaction of goods and service. But present day capitalism means stock market, various fiancé schemes and so on which really has no connection to real product or service. This pseudo capitalism has become so powerful that we forget the real Capitalism. Let’s hope this protest will not lead to completely abandon Capitalism but result in removing its deficiency which developed in it. We should not forgot that the technology which is fuelling this movement has also has its origin in Capitalism.

Fault in Goverment Schemes like Employment Guarantee

Last month I visited my hometown in Chhattisgarh. As monsoon has just arrived in central India, it was cultivation just started to begin. During one of my visit to village I encounter one peculiar problem originate due to government policies. There is huge of shortage of worker in farming and also if available they are highly costly. Hence many farmers not eager to take land for cultivation own by others. Due to this many land remain uncultivated and become barren. The underline reasons for this are government scheme like National Rural Employment Guarantee Act (NREGA) by central government and two Rs Kg rice program by state government. Well the intention of both policies can’t be question but the implication can be question. The intention is to provide constant basic income to poorest of poor but at the same time it makes them sole dependent on government subsidy. It can be a good vote bank policy but bad for economy and growth. NREGA emphasis on unskilled work, that mean a work doesn’t really add any value to his/her skill after working for years and still will depend on scheme like this to survive. Nor this scheme will make him to come out of spiral of poverty. Also there is lack of imagination on this type of project as in many places the outcome of this type of work is negligible. Apart, this is causing negative impacts on other area like agriculture and industry due to scarcity of worker and impact on cost.
Well I still favor this type scheme but with more thought process and imagination required on them. Why this type of scheme can’t be tied with productivity ? Let say employment guarantee can tied with primary education goal or with other agriculture scheme like National Horticulture mission. Also it should be focused on real poor region rather than implementing it across the country in respect of places where there are sufficient job opportunities and wages. This help in safe guarding on negative impact it is causing on economy. Also emphasis should be given on creating skill of the people rather than labor based unskilled works. This will help poor people to come out of poverty. Otherwise they will be just become a instrument of bring the same ruling elite again to power.