, pub-6370463716499017, DIRECT, f08c47fec0942fa0 AlfaBloggers Best Bloggers Team Of Asia : Is Kingfisher Airlines Cleared for Departure ?

Monday 8 October 2012

Is Kingfisher Airlines Cleared for Departure ?

It isn't just in the U.S. that big birds are in the firing line. India's aviation ministry says Kingfisher Airlines 532747.BY -4.91% has fifteen days to explain why it shouldn't be grounded permanently.

That seems like a waste of time. It is hard to see what additional proof is needed that Kingfisher should be put out of its misery.

After accumulating seven straight years of losses and a heavy debt load, the airline has been stuttering seriously in recent months, with frequent flight cancellations, strikes and other delays. Flights have been halted since last week because staff are refusing to work until they are paid long overdue wages. The airline's best option is to shut up shop immediately, said consultancy CAPA -- Center For Aviation.

The dark clouds around Kingfisher do come with a silver lining. India's domestic aviation sector has much long-term potential: air travel revenue will grow at a compounded average rate of 23.1% until 2016 to reach $37.3 billion, Euromonitor says.

While the sector as a whole is growing, though, individual airlines are suffering. Steep jet fuel costs and high landing and parking taxes charged by state governments are a curse on the entire industry. Stiff competition among domestic carriers has also crimped margins.

But Kingfisher's recent woes and seemingly imminent demise might be a big help, easing competitive pressures in the industry. Already, ticket fares on domestic flights have almost doubled in the past six months, KPMG analyst Amber Dubey said.

The increase is more significant because it comes despite a slowdown in the economy and--according to the aviation ministry--flat growth in domestic air traffic between January and August.

Low-cost budget carriers like IndiGo and SpiceJet -- which have managed to be profitable by being punctual and cutting costs on luxury services and buying new aircraft -- stand to gain the most from less competition and higher fares, industry analysts said.

New Delhi last month allowed foreign carriers to buy 49% of a domestic airline -- a move long awaited by many in the sector. But taking out a significant player -- as Kingfisher was until recently -- will possibly help the sector just as much. The exit of a lame bird should be cheered by the entire sector.

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