Why monopoly is bad in business

The only place where one likes Monopoly is when playing the popular card game, buying and selling property with imaginary money. But then, it is not real money and it really does not matter if one wins or loses. But not when the money is yours or mine or that of a private airport developer.

As Grandhi Mallikarjuna Rao or GMR for short, was all glee as he got his family to pose with Sonia Gandhi in the main departure lounge of the Rajiv Gandhi International Airport at Shamshabad on the outskirts of Hyderabad. Behind the smiles and back slapping and sycophantic speeches, trouble was brewing. And soon came the announcement – the shift to the new airport will not happen on 16th March when the first commercial aircraft, a Lufthansa from Frankfurt to Hyderabad was supposed to touch down just after midnight. “It’s off by a few days” came the bland announcement from the Union Civil Aviation Ministry. What is the real story ?

It has all to do with GMR flexing its newly found muscle in forcing airlines to accept new terms and conditions. The first grumbling from the airlines came when GMR decide to impose fuel throughput charges on fuel supplied to airlines. This in one shot, negated the reduction in sales tax on aviation fuel announced by the state government. This move by GMR showed its intent on maximizing revenue from the airport, into which it claims to have invested over 3500 crores. No one knows whether GMR has really invested the money they claim to – or they are just fibbing.

Next came the ground handling issue, which proved to be the issue which the private airlines were just not ready to accept. GMR had awarded ground handling to two consortiums, Air India- Singapore Air terminal services and Menenzis. Naturally these companies must have paid GMR a neat pile of money to get the contract. And to recover that, they will look to charge airlines beyond what their own ground control staff would have cost. Naturally, low cost airlines as with full service carriers decided that it was time to call the bluff. Vijay Mallya and Naresh Goyal have enough political clout of their own and GMR learnt their first lesson in aviation business.

For consumers, the Airport user charges that were sought to be levied only added to the cost and made flying an expensive business. Finally, GMR relented by dropping the charges for domestic flyers and charge international travelers instead. The question is who keeps a tab on how much GMR will make out of this rip-off. How long will they keep fleecing customers who have no choice but to put up with the nonsense ?

This is exactly what all those involved in the business have been warning us about. From the die hard commies to harried passengers, everyone has been asking for competition to keep airport developers in check. Imagine in a telecom parlance, the scenario if only one operator was allowed to operate in a city. Tariff would have gone through the roof and users would have been arm-twisted into binding contracts and inflated bills. Luckily for us, that did not happen and we have a great choice when it comes to telecom. So why cannot we have more than one airport in a city, specially the bigger cities which have the capacity to generate higher volume of traffic.

There has been a hue and cry over the last few weeks, asking for the HAL airport in Bangalore and Begumpet airport in Hyderabad to be kept open for commercial traffic. In a bid to end the strike by a section of the AAI employees, the Union Civil Aviation Minister, Praful Patel made a concession – he would speak to the operators of the Greenfield operators and ensure that old airports in both the cities would not be closed down. And that is good news for consumers who been crying foul on the question and cost and accessibility of the new airports.

The only way out is to have competition. The Government should have the AAI run the old airports and let GMR run their goldmine. Let the consumer decide which airport they want to use. Are you listening Mr Praful Patel ?