2012 Not a Good Year for India's Aviation Industry

Monday, 14th January 2013 at 01:15am

The year 2012 seemed to be quite hostile to aviation industry in India as the erstwhile second-largest airline, Kingfisher Airlines, plunged to its darkest moments in its seven-year history as it met its untimely demise.

As if it was not enough, other carriers experienced severe financial hardships in years such as the flag carrier, Air India, which was forced to downsize operations. Over in the Laccadive Sea, 400 kilometers southwest of the country, the Maldivian government canceled its contract with an Indian firm for an airport upgrade worth half a billion dollars.

The Indian government tried its part to prevent the industry from plunging further down by opening its heavily-protected industry to foreign investors. However, there seems to be no takers, as yet.

Bringing the ticket prices down is impossible as airlines also face high operational costs such as the ever-increasing fuel prices and high airport fees. As a result, domestic air travel in India declined by almost 3 percent last year.

Another big news to hit the local headlines was the termination by the Maldivian government of a contract with a major Indian firm, GMR, for the modernization and expansion of its lone international airport. The multimillion dollar contract was entered into by previous administration of Maldives with the Indian company in 2010.

The recent opening up of local aviation industry to foreign investors has not produced positive results yet as there seemed to be no foreign-based companies were interested in investing in India's cash-trapped airlines.

IATA Chief, Tony Tyler, has lamented on the current state of affairs of the aviation industry in India for its high taxes, high airport fees and high operational costs which are the primary ingredients to keep off foreign investors.

Government-controlled Air India would have been out of business had the government's not come to its aid, infusing large amount of money for its restructuring programs until 2021.

A major strike by most of its pilots last year that lasted for almost two months caused Air India to suspend many of its long-haul routes and regional services.

Kingfisher pilots and engineers also had their own strike arising from non-payment of their salaries. This and other troubles led its own demise in October when the government canceled its license to operate, effectively ending its seven-year run of unprofitable operations.

Kingfisher, as of late, is asking regulators to reactivate its license for a limited run in 2013. While there is a possibility of securing back its license to operate again, they should comply with the requirements set forth by DGCA before it is granted back to them.

Industry analysts see a better year for the aviation industry in India in 2013 as the government has already given directives to Airports Authority of India who manages all airports across the country to make it more attractive for airline operators and would-be investors.

By: Pete Lee.