Kingfisher is just an example to show that the situation for practically all airlines in India has reached a tipping point. The private carriers have little hope for survival in the long run unless the government sheds its indifference towards their financial plight and undertakes a comprehensive review of its policies.

Kingfisher Airlines was esta blished in 2003 by Dr Vijay Mallya, head of the highly successful Bangalore-based United Breweries (UB) Group. The airline started commercial operations in 2005 with a fleet of four new Airbus A320-200s aircraft. This was heady time in the Indian civil aviation scenario, with fantastic growth forecasts luring a large number of private players to join the fray as also take advantage of the government’s ‘Open Sky’ policy. Backed by the financial clout of its parent—the UB Group, Kingfisher Airlines quickly expanded its fleet size and operations to become the second largest private airline after Jet Airways which incidentally had a 10-year lead on Kingfisher. True to his own flamboyant and effervescent lifestyle, Mallya did not want anything but the best for his airline too. ‘The King of the Good Times’ Mallya wanted Kingfisher passengers—nay, his guests—to ‘Fly the Good Times’. Kingfisher Airlines was to be a ‘full service carrier’ (FSC) and more. He ordered the best of the airplanes and provided special travel experience to his guests with better and more comfortable seats and superb inflight service with a personal eye for details. When operations began in 2005, his was the first airline in India to provide in-flight entertainment (IFE) system on every seat even on all its domestic flights. In a short span of time after starting operations, Kingfisher Airlines was able to create a unique brand name for itself, grabbing a major chunk of the ‘full service’ segment in India’s airline industry. Kingfisher became one of the only seven airlines worldwide to be awarded five-star rating by Skytrax. More recently, it also bagged the Skytrax award for India’s best airline of the year 2011. The very brand name ‘Kingfisher’ began to be associated with its motto ‘Fly the Good Times’ as the airline not only ensured comfortable travel for its ‘guests’ but also spoiled them with ‘goodies’ and many ‘extras’.

The last decade also saw a large number of private players coming into the low-cost segment of the airlines business. This model was pioneered by Captain G.R. Gopinath with the launching of Air Deccan in August 2003—a ‘lowcost carrier’ (LCC) concept, also known as the common man’s airline. The initial success of Air Deccan prompted three new LCCs—IndiGo, SpiceJet and GoAir—to emerge on the scene soon after and which proved to be highly successful. Not to be left out of this lucrative segment and following a simpler merger route, the leading private airline Jet Airways acquired the financially troubled Air Sahara, rechristening it JetLite as the low-cost arm of the full service carrier Jet. Competing neck-on-neck with its bigger rival ‘Jet’, Kingfisher surreptitiously roped in and later bought out Air Deccan to operate as its low-cost model under the Kingfisher brand as Kingfisher Red. The national public carrier Air India and Indian (Indian Airlines), on the other hand, went on a super merger route along with their subsidiaries Air India Express and Alliance Air, respectively.

In hindsight, it is clear that the airlines which adopted the ‘mixed’ (FSC+LCC) models were unable to profitably run the business under the same management. Air India’s financial nosedive is well known by now but the carrier continues to be supported by the public money doled out periodically by the Central Government. While Jet Airways managed to contain its losses, it was the Kingfisher which ran deep into ‘red’. The dichotomy and the conflict between the two approaches was felt most acutely by none other than ‘Kingfisher’ but by the time it decided to shed the LCC segment (Kingfisher Red) of its airline business towards the end of last year, it had probably reached the ‘point of no return’ in its dangerous journey to financial ruin. That the ‘King of the Good Times’ is sinking into ‘bad times’ is evident from the never ending financial blows it is being subjected to by its creditors and suppliers. Already staring at a possibly terminal financial illness, it suffered another blow on March 7 when the International Air Transport Association (IATA) ordered over 30,000 of its affiliated travel agents to stop booking tickets for the airline over its failure to settle outstanding dues since February—a move akin to the Reserve Bank of India (RBI) removing a commercial bank from its currency clearing system. This has happened at a time when all bank accounts of the airline have already been frozen by the Income Tax Department for non-payment of tax dues and the airline is reduced to whatever operations it can muster on strictly ‘cash-and-carry’ basis.

The big question is why an astute businessman of the calibre of Dr Mallya would allow his airline to sink so low. Was it reckless expansion without consolidation? Was it over ambition? Was it disregard of the normal financial practices? Or, was it a mixture of all? It is true that Dr Mallya went headlong into the aviation business thinking that he would conquer it in the same manner as his other liquor business at which he had succeeded as if he had the ‘Midas’ touch. He even named his airline after the highly popular and bestselling Kingfisher beer from the United Breweries of which he is the Chairman and Managing Director. He wanted the best for his airline too, no matter what the costs. And as it stands today, he paid a heavy price for it.

But is he alone to be blamed for the financial impasse that Kingfisher Airlines finds itself in? At the turn of the century, India was awash with prophesies of one of the highest in the world growth stories in the civil aviation sector. With an average annual growth rate hovering around 10 per cent for passenger traffic in the civil aviation sector, the story remains intact. But even then, the entire sector is facing the heat of financial distress. While Kingfisher has never been out of the red since its inception in 2005, the other airlines are also struggling for survival thanks to many lopsided policies adopted by the government. Inadequacies in the civil aviation infrastructure and high cost of operations have contributed vastly to the civil air operators’ woes. High and continuously rising cost of aviation turbine fuel (ATF) with taxes as much as 30 per cent in some states, exorbitant airport charges and bar on investment by foreign airlines, not to speak of over capacity and depressed fares due to fierce competition has left the airlines gasping for air. The maintenance, repair and overhaul (MRO) scene is no better. Servicing an aircraft in India entails service tax of 12.36 per cent as compared to zero tax overseas with spare parts attracting custom duties of 25.4 per cent.