Kingfisher Airlines was an Indian airline based at Mumbai International Airport, with secondary hubs at New Delhi and Bangalore airports. Kingfisher was India's largest domestic airline, and served over 55 cities on the Indian Subcontinent, as well as offering scheduled international service to destinations in the UK, UAE, Sri Lanka, Nepal, Bangladesh, Thailand and Hong Kong. Kingfisher merged with Air Deccan in 2008, which saw the launch of LCC Kingfisher Red and international service.
Kingfisher Airlines suspended services on 20-Oct-2012 after India’s DCGA suspended its flying license. In Feb-2013, India’s Government withdrew the carrier’s domestic and international operating certificates.
Location of Kingfisher Airlines main hub (Mumbai Airport)
Kingfisher Airlines share price
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This is the last of a four-part series of extracts from the annual India Aviation Outlook Report for FY2013/14, to be published on 6-Jun-2013.
In this final extract we review the financial and operational performance of Indian carriers in FY2013 and look ahead at their prospects in this new financial year.
The first extract looked at the changing dynamics of the airline sector on both domestic and international routes, while the second examined the policy vacuum that persists in India and the impact this has on the viability and development of the sector. The third part addressed key issues in airport and airspace infrastructure.
Kingfisher Airlines’ suspension of operations has had a flow-on impact on the global leasing and financing sector, highlighting some of the challenges facing aircraft financiers and lessors in the Indian market and again raising concerns regarding regulatory safeguards for international investment in India.
The continued delays by the Indian Government to de-register Kingfisher-operated aircraft since it suspended operations in Oct-2012 is also expected to hurt other, still-operational, Indian carriers while also creating the impression that India is not adhering to the Cape Town Convention, of which it is a signatory.
ILFC and DVB Bank have been the most vocal about the challenges in the market, with both companies encountering ongoing and costly problems in repossessing aircraft previously operated by Kingfisher Airlines and only now making some (slow) progress on regaining access to their aircraft.
1QFY2012/13 marked the best result in 18 months. In the three months ended 30-Jun-2012 all private Indian carriers, with the exception of Kingfisher, were profitable, albeit that in several cases this was as a result of sale-and-leaseback and other income.
1QFY2012/13 reflected two key trends faced by Indian carriers. On the one hand, improved matching of demand and supply (largely as a result of the contraction of capacity by Kingfisher), combined with greater pricing discipline resulted in a substantial increase in average yields which contributed significantly to the improved performance.
But this was offset by a hostile cost environment primarily related to high fuel prices and a weak currency. The particularly strong performance by Air India, which achieved the highest average fare and reported a small operating profit on domestic operations, reflected the changing market dynamics.
The story of exceptional growth in the Indian domestic market took a diversion for a third consecutive month in Jul-2012, with a 9.9% year-on-year decline to 4.53 million passengers. Year-on-year reductions in passenger numbers commenced in May-2012, with a 0.9% year-on-year reduction in passenger numbers to 5.4 million, while Jun-2012 witnessed a larger 3.8% year-on-year decline to 5.10 million passengers.
India was the only major domestic market worldwide that failed to show an expansion in demand (RPKs) in Jun-2012 compared with the previous year. This was preceded by almost three years – or 35 consecutive months – of uninterrupted growth, most of it at double-digit rates (all but six of these months witnessed double-digit growth). Up until Feb-2012, India's growth rate was among the highest in the world with double-digit increases in passenger carriage, supported by strong domestic demand and economic growth.
Recent woes in the Indian aviation sector are providing a further boost to the international aspirations of the nation’s LCC operators. IndiGo and SpiceJet are changing the market dynamics by opening up new international routes to low-cost competition as the Ministry of Civil Aviation grants private carriers additional access to bilateral entitlements.
Air India continues to lurch from one crisis to the next. The airline suffers from low productivity, high costs, poor staff morale, significant unresolved human resource issues and an unviable business model. There appears to be a lack of accountability within management and at the level of the Government. After years of neglect the approach to turning around the airline continues to lack both decisiveness and a willingness to take difficult decisions, in the absence of which no meaningful recovery can occur. In this article we review recent developments at Air India and look ahead to the carrier's prospects in FY2012/13.
The full 100-page CAPA India Aviation Outlook 2012/13 offers the most detailed insight into the direction of the sector at this critical juncture. To order your copy, please download the order form to the left, or contact Binit Somaia on firstname.lastname@example.org or +61 2 9241 3200. Special discounts are available for CAPA Members and for advance purchases.