Kingfisher Airlines faces uncertain future due to fuel price hikes

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Based in Bangalore, Kingfisher Airline is the first low budget airfare airline and is the subsidiary of Kingfisher. Photo - CityTravelGuide

Kingfisher Airlines, India?s second largest commercial airline, seems to have lost it air route as it reported doubling of losses of $93 million in its third quarter. The airline is also facing a huge debt of nearly $1.3 billion amid a 70 % fuel hike, which is stated as the primary reason for the losses.

However, this has lead to cancellations of many Kingfisher airlines flights across India and other parts of the world. Liquor baron and Kingfisher airlines part owner Vijay Mallya has called Indian government for a rescue package and also to allow FDI in aviation industry, as it is already facing a huge financial crunch in recent years.

Kingfisher Red, the budget airline established in 2005, is facing continuous losses during the years. Mallya said there will be some changes in the coming four months.??We are doing away with the Kingfisher Red because we do not intend to compete in the low-cost segment,? the Indian tycoon said in a statement.

He added: ?We believe that there are enough people who prefer to travel full service Kingfisher class and that shows through in our own performance where load factor in the Kingfisher class is more than Kingfisher Red.?

Kingfisher airlines’ crises has gone bad to worse in the recent months and after it found difficult to raise fresh capital, which resulted in unpaid debts. Creditors are now asking the airline to raise around $159 million by which the debt can be paid off.
However, State of India, which is India?s largest airline lender, has warned the airline to ready a credit business plan before entering into restructuring.

In the month of September, the airline is shutting down Kingfisher Red,?its budget carrier operation, as it failed to compete in the low-cost market. To make matters worse, dozens of airline pilots have quit the company due to non-payment of salaries.
Currently, all budget carriers except Indigo Airlines, are grappling with high international oil price and credit crunch.

?Market mechanism should take care of health of private sector. If today government provides any assistance to the sector, then tomorrow they may start interfering in the running of the airline and fare fixing,??an aviation analyst in Mumbai said.

There is no doubt that with the increase in fuel prices, budget airlines – especially private airlines – are going to be severely affected, which ultimately turns into cost cutting. During the initial period of arrival, budget airline do fly in the higher market, but once the financial crunch rolls over them reduction in operation seems to be the only solution.

Kingfisher and other budget airlines are also caught up in the same situation facing cash deficit due high fuel prices. Private carriers such as Jet Airways and budget operator Spicejet are also on the edge due to fuel price hike.

Centre for Asia Pacific Aviation (CAPA) says, despite the rise in passenger traffic, Indian Airlines would be facing a loss of $2.5 billion till March end, and the state owned Air India will face the loss half of that.

Kingfisher faces an uncertain future as it?has already ordered hundreds of aircraft as part of an ambitious expansion project. Analysts predict Mallya will be forced to scrap the deals worth millions of dollars due to bleak economic situation.

Sources: BBC News, Arabian Business, Wall Street Journal, The Hindu

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