The fact is that all three ‘mixed’ carriers have incurred varying degrees of cumulative losses. While Jet Airways has been able to keep the losses within reasonable limits, Kingfisher Airlines’ cumulative losses and debt burdens may have crossed the $2 billion mark.

On September 28, Chairman of Kingfisher Airlines Vijay Mallya literally dropped a bombshell on the Indian civil aviation industry by announcing that the company would soon stop operations of ‘Kingfisher Red’, as it did not believe in lowcost operations any longer. The announcement came as a complete surprise in the airline circle as the world over low-cost carriers (LCC) are seen to be gaining ground over full service carriers (FSC), as the preferred models for air travel.

Kingfisher Airlines was established in 2003 by Mallya, head of the Bengaluru-based United Breweries (UB) Group. The airline started commercial operations in 2005 with a fleet of four new Airbus A320-200 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. This was also the time when a large number of private players were coming into the low-cost segment of the airline business. This model was pioneered by Captain G.R. Gopinath with the launching of Air Deccan in August 2003, a low-cost carrier 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 which it 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 as JetLite, 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 disastrous super merger route along with their subsidiaries Air India Express and Alliance Air, respectively.

With the mergers and realignments in place, what emerged on the domestic airline industry scene was a mix of FSC and LCC on the one hand and purely LCC on the other. While the FSC segment had just the Air India, Jet and Kingfisher, a total of three to compete with each other; the LCC segment got crowded with as many as five players with IndiGo, SpiceJet and GoAir joining the fray with JetLite/Jet Konnect and Kingfisher Red as also Air India Express of the national carrier to a limited extent. This resulted in an unsavoury cutthroat competition in the LCC segment. The 2008-09 global economic meltdown followed by unprecedented hike in aviation fuel prices adversely affected both the segments, which were by now experiencing unfavourable demand vs. capacity ratios and high operational costs. Because of their higher vulnerabilities to the operational costs, the LCCs should have felt the financial heat more, but a market study on how did the two segments cope up with the emergent situation reveals that it was the mixed segment which suffered greater setbacks than the pure LCC.