Stiff competition in airspace: 12 airlines close down in 21 years

NEW DELHI: Naresh Goyal-founded Jet Airways is possibly only the second private airline after SpiceJet to get a shot at reincarnation. The low-cost carrier owes its origin to ModiLuft, which flew from 1993 to 1996. While Indian skies have seen tremendous passenger growth, the country has had its share of airlines that ran out of fuel — 12 in 21 years.

The most prominent failure was Kingfisher. Vijay Mallya, the flamboyant founder of this airline, has sent a series of angry tweets after Jet minus Goyal was taken over by lender banks. Mallya did manage to get a fair share of Kingfisher debt restructured to equity and banks took a big haircut. He desperately tried in 2011-12 to get the then Congress-led coalition to allow foreign airlines to invest in Indian ones, but failed.

This policy was approved after Kingfisher was shut down in October 2012. That change led to Etihad picking up 24% stake in Jet and Tata Group starting two JV airlines, one each with Singapore Airlines and AirAsia.



“Happy to see that PSU banks have bailed out Jet Airways saving jobs, connectivity and enterprise. Only wish the same was done for Kingfisher…. I invested over (Rs) 4,000 crore into Kingfisher Airlines to save the company and its employees…. The same PSU banks let India’s finest airline with the best employees and connectivity fail ruthlessly… I have placed liquid assets before the Hon’ble Karnataka High Court to pay off the PSU banks and all other creditors. Why do the banks not take my money. It will help them to save Jet Airways if nothing else,” Mallya tweeted from London.



So, what are the reasons behind the grounding of so many airlines despite steady rise in traffic? Indian airlines operate in a cost-hostile environment. Jet fuel for domestic flights is among the priciest here globally, due to steep taxation. A crippling shortage of infrastructure adds to problems as busiest airports like Delhi, Mumbai and Bangalore and even smaller ones have choked terminals and find it hard to accommodate more flights.

Also, intense competition and the race for market share have led to airlines offering below-cost fares, which has led to a situation of profitless growth. “It is not mismanaged Indian airlines, which are being kept alive on ventilator, even the well-run ones have to constantly dodge the bullet,” said an official.

Few airlines in India, including government-owned Air India, have had luck in finding life after near death. Captain Gopinath-founded Air Deccan, India’s first budget airline, was bought over by Kingfisher in 2007 and the latter was shut down in 2012. Air Sahara was bought by Jet in same year as Deccan and now Jet is on the ventilator of lenders.

SpiceJet is an exception. It had its origin in ModiLuft (1993-1996). Less than a decade later, it was bought by Ajay Singh, who launched it as SpiceJet in 2005, along with UK-based NRI Bhulo Kansagra. In 2008, Kansagra sold his stake to US distress investor Wilbur Ross. Two years later, Ross and Ajay Singh sold their stake to Sun Group’s Kalanithi Maran. In 2015, Maran sold his stake back to Ajay Singh.