How Kingfisher Impacted the Aviation Industry

Monday, 14th January 2013 at 01:37am

The troubles of Kingfisher Airlines have greatly affected the country's entire aviation industry. Since it started operations seven years ago, the airline had been accumulating losses year after year.

In the early part of last year, a dreaded scenario was shaping up as several of its flights were canceled and some aircraft grounded. As a result, only one third of its fleet remained in service by early February 2012, subsequently discontinuing all its short-haul international service. In the ensuing months, employees staged a series of strikes due to delayed and even unpaid salaries. The government finally intervened and ordered the airline to suspend its operation effective October last year.

The cessation of operations by Kingfisher Airlines was essentially a boon to other airlines and a bane to India's air travelers as rival low-cost airlines jacked up its ticket prices much to the chagrin of the traveling public. The sudden huge price increase made by low-cost carriers shook up India's air travel industry, essentially obliterated the line between low-fare and full fare airlines.

The forming of another airlines or deployment of more planes by existing airlines to fill the slack are possible ways to resolve the problem. However, most Indian carriers are also in dire needs of more planes in their network to serve at their optimum level. IndiGo's Aditya Ghosh admitted that Indian carriers have a combined fleet of only 440 aircraft of all types as compared to 11,000 commercial planes for the US.

The 400 slots left by Kingfisher Airlines prior to its suspension for both arrival and departure can't even be filled by IndiGo and GoAir's recent order of a combined total of 152 A320s as addition to its current fleets. The slots remain unused by its rival carriers.

Kingfisher's dilemma has also affected would-be airline investors. Shyson Thomas, for instance, has been scouting for planes from lessors around the globe but all of them shun Indian companies. He would like to launch his own company, Air Pegasus, as soon as he acquires even a single plane.

The lessors' decision not to lease to Indian companies has been based on their recent experience with Kingfisher. Their efforts to repossess their aircraft leased to the troubled airline seem like an uphill battle against Indian authorities who offered resistance. This has been a major barrier to new airline investors who want to lease new aircraft for their initial operations.

Another thing that deters lessors to lease aircraft to Indian companies is the propensity of Indian airports to charge aircraft owners (lessors) for debts owed to them by Kingfisher. The charges are usually high preventing the rightful owners to remove their aircraft out of the country. This and other factors have diminished the chances of Indian airline investors to lease aircraft from lessors and financiers.

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