The rapid demise of Kingfisher Airlines continued this week as rumors abound that the Indian government will revoke the private carrier’s operating license, the Economic Times of India reports.
According to the Indian daily, sources from the Directorate General of Civil Aviation (DGCA) claimed that:
“(t)he airline not only lacks aircraft, they also lack funds for day-to-day operations. They are failing to meet their flight schedule, causing inconvenience to the passengers and also they failed to give salaries to their employees for past four-five months.”
The airline has announced that most international operations will be terminated by March 25th. As well, the airline’s upcoming schedule indicates that it will operate only 15-16 of its 63 aircraft. Further, according to the Centre for Asia Pacific Aviation, Kingfisher’s debt is $1.3 billion and the airline will need an additional $400 million by April just to survive.
Unless Kingfisher CEO Vijay Mallya can demonstrate a plan for the airline to feasibly regain profitability going forward, it is unlikely that Kingfisher will be able to maintain an operating license.
Kingfisher’s woes are not confined to the DGCA. The last of Kingfisher’s independent board directors quit today. Unless Kingfisher can quickly find independent directors for their board, the airline could potentially run afoul of regulations for listed companies in India.
Kingfisher’s ignominious decline stems from a number of factors, such as poor management, excessive debt, and increased competition in the Indian domestic sector that led to a brutal fare war between Kingfisher and domestic competitors like Jet Airways, SpiceJet, and IndiGo.
The most glaring example of Kingfisher’s poor management was its decision to merge with Air Deccan, a low-fare carrier. Air Deccan’s cost structure increased drastically after it was incorporated into Kingfisher, preventing it from operating profitably. Further, the arrangement saddled Kingfisher with debt that it could hardly afford. It is rumored that Kingfisher’s primary reason for the merger was to circumvent Indian laws regarding international flight rights for nascent carriers.
This failed venture is indicative of the difficulty for airlines in India to operate with onerous government restrictions for the sector. If the Indian aviation sector is to reach its potential — it is projected to become the world’s third-largest aviation market by 2020 — the government will have to minimize bureaucracy and decrease regulatory restrictions in areas such as foreign ownership.
Fortunately, the Indian government is mulling over allowing Indian carriers to raise capital abroad. Such an easing of regulations, along with increased consolidation in the domestic sector, could be green shoots for the struggling Indian aviation industry.