NEW DELHI--Despite growing passenger numbers, Indian airlines are struggling to stay aloft amid turbulence from cutthroat competition and state support to the national flag carrier.
For the year ended in March, the nation’s six airlines are all expected to report net losses, except for IndiGo Airlines, the largest low-cost carrier.
According to estimates by the Center for Asia Pacific Aviation, a private think tank, net losses at the six companies will total $8.5 billion (700 billion yen) for the nine years through fiscal 2012.
India has deregulated its aviation market since the 2000s, and new players, mainly low-cost carriers, have started services, fueling competition.
The number of passengers has recorded a more than fourfold increase over the past decade and is estimated to have exceeded 70 million in fiscal 2011.
Aditya Ghosh, president of IndiGo Airlines, said India is still a developing economy where low airfares are the deciding factor in attracting passengers.
It is estimated that 70 percent of domestic passengers fly on low-cost carriers.
Five of the Indian airlines either specialize as a low-cost carrier or operate a discount brand in addition to regular service.
The only exception, Kingfisher Airlines, has been forced to cut the number of flights to one-third, being unable to pay for fuel.
Kingfisher, which launched operations in 2005, announced on March 20 it will suspend all international flights. Chairman Vijay Mallya said the company will do business only with aircraft it can manage to fly.
A week later, Kingfisher said it will reduce domestic flights to 120 a day, compared with 360 overseas and domestic flights in November, and furlough half of its 7,000 or so employees.
In addition to a lack of funds for fuel payments, more than 300 pilots and other crew members left over unpaid wages in the past six months. The airline can now fly only about 20 aircraft, down from 64.
Kingfisher’s financial crisis deepened in February, when authorities froze some of its bank accounts after unpaid taxes reached 1.3 billion rupees (2 billion yen, or $24.9 million).
Business partners, worried about its future, demanded cash payments. When payments fell behind, the fuel supply was suspended, leading to numerous flight cancellations.
In March, Kingfisher’s share in the Indian market was 6.4 percent, the smallest among the six players. The company was ranked second in fiscal 2009.
Its survival is on the line because creditors are reluctant to extend additional loans.
Kapil Kaul, at the Center for Asia Pacific Aviation, criticized the Indian government for distorting competition by propping up Air India with taxpayer money.
The state-owned airline is in a chronic deficit, alienating passengers with frequent flight cancellations and late arrivals caused by employee strikes.
Kaul said Air India has set fares extremely low, sometimes even at levels that cannot cover fuel costs, putting unfair pressure on private rivals.
He said the government has tried to support the company only with stopgap measures, without introducing drastic management reforms.
The government on April 12 decided to provide up to 300 billion rupees in financial aid to Air India in exchange for cutting personnel costs by spinning out such operations as aircraft maintenance and cargo unloading.
Many analysts say industry realignments will be inevitable, possibly triggered by foreign airlines.
The government is considering deregulation to allow foreign airlines to own up to 49 percent of domestic rivals. There is speculation that many companies, including British Airways, Singapore Airlines and Etihad Airways of the United Arab Emirates, are planning to enter the Indian market.
If foreign airlines bail out ailing domestic players, they can establish a foothold in India with a relatively small investment.
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