After a stretch of erratic flights and three days of shutdown, the aircraft of Kingfisher airlines, the Indian airline that last year held the second largest market share in the country, will remain grounded for another week. Now the carrier is submerged in $1.5 billion in debt, with no more access to credit and no assets to mortgage. Banks, and those run by the state in particular, have denied the company further liquidity and the airline has been unable to pay wages for seven months. The widely publicized suicide of the wife of an employee has fanned the flames of a union dispute that shows no signs of a resolution. Appeals to return to work have fallen on deaf ears, and even the government seems reluctant to reinstate Kingfisher’s flight authorization, now that workers have neglected to perform critical maintenance for days. And so the airline, founded in Mumbai by Indian liquor tycoon Vijay Mallay, is destined for an inglorious end. A misguided pricing policy, a hasty acquisition of Air Deccan, and the heavily competitive market are frequently cited reasons for Kingfisher’s downturn, which reprises the loss in market share of Air India. Founded in 1932 under the popular symbol of the Maharajah, the leading India airline had bought Indian Airlines from the state, which ultimately proved to be a negative move for the company. Air India has not turned a profit for six years and its market share has fallen from 42% to 16% over the last decade, hampered by high fixed costs, strong unions, and excessive benefits for managers. Other smaller private airlines, such as JetAirways, Spice Jet, and IndiGo have been more successful, although their profit margins have also tightened. Despite carrier mergers, the Indian commercial aviation market is struggling to take off. Per-capita flights in India are one-third of those in China and just 5% compared to Europe. The proliferation of competition and rising fuel prices has put a further squeeze on profit margins, and a lack of strategy or deregulation hovers over the whole market. Regulations are still very strict, as are rules of the labor market. Now only an influx of ideas and capital can help an industry that never fully matured. After years of hesitation, the Indian government finally approved a law allowing foreign investors to hold up to 49% of the sector, and it is these very same foreign investors that Kingfisher is now looking to for a lifeline before it becomes too late.
