In an airfield in southern India, seven planes of the failed Kingfisher Airlines rust away — relics of a former billionaire’s ambition and emblems of the complex regulations that hamper Indian aviation.
The decaying aircraft, damaged by floods in Chennai late last year, were part of the fleet of India’s once second-largest airline. As authorities try to recover up to $1.36 billion of debt owed by Kingfisher’s founder Vijay Mallya, aviation analysts say regulatory changes in the wake of the airline’s 2012 demise don’t go far enough in supporting the world’s fastest-growing air travel market. While lower oil prices are helping to restore profit at some airlines after the industry accumulated $10 billion of losses in the past seven years, carriers are still hamstrung by controls Mallya lobbied in vain against: Taxes that mean India jet fuel prices are the highest in Asia and restrictions on international routes that limit growth for new entrants.
“Regulatory and policy roadblocks, coupled with a very negative fiscal regime and high jet-fuel prices, did create serious financial and viability challenges for Kingfisher,” said Kapil Kaul, the New Delhi-based South Asia chief executive officer at market researcher CAPA Centre for Aviation. “Some of those issues still remain in the industry.”
Besides the risk of a sudden upswing in the oil price, proposed new aviation rules haven’t addressed the taxes and tariffs that have dragged down earnings, according to the International Air Transport Association, known as IATA.
After five straight years of losses and mounting debt, Kingfisher was grounded in October 2012 as workers protested unpaid wages and lenders unsuccessfully attempted to revive the carrier, which ran up high costs in a bid to redefine luxury travel in India. Airbus Group still has orders open from Kingfisher for 82 A320s and A330s after the carrier crossed off A380 superjumbos from its list.
Mallya, the 60-year-old tycoon who presided over a beer and liquor empire a few years ago, has said Kingfisher Airlines was an “unfortunate commercial failure” caused by macro economic factors and government policies. Analysts including CAPA’s Kaul and Robert Mann, a former director of American Airlines Group, attributed its failure to poor management also.
The government released a plan in October to overhaul aviation rules, some from the 1930s, to boost growth in a market that Boeing Co. expects will need 1,740 new planes, worth $240 billion, over the next 20 years. India was the world’s fastest-growing air travel market last year, expanding more than 20 percent, compared with China’s 10 percent and less than 5 percent in the U.S., according to Montreal-based IATA.ada