Page 14 - AAA JANUARY- FEBRUARY 2013 Online Magazine

FEATURE INDIAN LOW COST CARRIERS

and with air fares at not much more than
a first class train ticket – the traditional
means of travel for India’s burgeoning
middle class – it’s not surprising that
there was massive growth in LCC
traffic. But all this was a little too good
to last, and the bubble soon burst.
“Airlines were growing far too fast,
and this was exposed by the fuel price
spike of 2008,” notes Somaia, adding
that with a range of government taxes
adding 60% to the global fuel price, India
was hamstrung by the most expensive
aviation fuel market in the world.

Losing the fizz
“Low fares rapidly became uneconomic,
prices increased, and traffic declined by
10% – which has had a huge impact on
all carriers,” Somaia explains. The most
notable casualty of all these pincer-
pressures has been Kingfisher Airlines,
once voted the best carrier in India. Its
STATE OF KINGFIShER AIRLINES IN EARLy 2013 flying licence was suspended in October
As of January this year, the outlook for Kingfisher Airlines’ seemed most 2012. Known for its extravagant in-
dire. Grounded in October 2012 and sporting around 85 billion rupees (more flight service, and highly paid staff, its
than uS$1.5 billion) of debt at the time of writing, in January the airline lost
its flying permit after a deadline to renew its suspended licence expired. real trouble began when engineering
AFP quoted the head of the Directorate-General of civil Aviation (DGcA) staff, who had not been paid since the
Arun Mishra as saying, “Kingfisher’s flying permit has lapsed. They failed to start of that year, went on strike at the
provide additional details on the funding of operations [in their revival plan end of September, and were later joined
submitted to DcGA in December].” by pilots. The industrial action resulted
According to the Wall Street Journal, an Indian civil aviation ministry official in a lockout and suspension of several
told the press that the DcGA would not renew Kingfisher’s licence until the services and routes.
airline was able to demonstrate its “capability for providing efficient and While Kingfisher’s owner Vijay Mallya
reliable service”. The official elaborated on some of the issues that the DcGA and creditors continued to negotiate
was concerned about, reportedly stating, “Kingfisher’s planned investment of
Rs 650 crore (6.5 billion rupees, or uS$118.5 million) is not enough to restart for services to resume, competitors
operations. This revival plan does not guarantee a reliable service. There are a such as Jet Airways and IndiGo were
lot of issues regarding lenders [and] staff payment, which we felt may not lead happy to step into the breach and take
to reliable services. We want an airline to operate in consistent, efficient and over Kingfisher’s market share – and
reliable manner. The plan has no provision for airport dues.” continue to thrive as a result.
Kingfisher’s chairman Vijay Mallya has stated in an open letter to “After the closure of Kingfisher
employees that the company is in talks with several investors to sell a Airlines the sudden shortage of capacity
stake and raise funds, and that he hoped to restart operations by the end resulted in all carriers charging high
of March, with a cash infusion of uS$100 million from parent uB Group. fares,” says Vardhan: at the end of 2012
More specifically, he reportedly wrote in the letter, “We have submitted a
detailed restart plan to the DGcA which is in two parts. The first part deals prices were 40% to 50% higher than
with a limited restart utilising seven aircraft ramping up to 21 aircraft in four only a year previously.
months. The second part is a full-scale rehabilitation of our airline growing Nonetheless, the LCCs still fared
to 57 aircraft within 12 months of recapitalisation.” slightly better than the full-service
On a slightly more positive note, not everyone seems to have lost carriers, many of which diverted their
confidence in Kingfisher. chairman and Managing Director of Oriental Bank excess capacity to the no-frills LCC
of commerce (OBc) S. L. Bansal told press on January 11, 2013 that: “We will category during the intensive price
definitely recover the dues from Kingfisher by March 31.” Soon, the world wars, points out Vardhan. In fact today,
will discover if that is true.
segmentation has almost completely
disappeared because the prices
14 ASIAN AIRLINES & AIRPORTS JANUARY / FEBRUARY 2013 WWW.ASIANAIRLINES-AIRPORTS.COM