Miranda Mills, vice president at Airbus, said the manufacturer had been in regular conversation with its Indian customers and was not worried about any of Kingfisher’s orders, including those for the A380. She added that Airbus was discussing the look of the cabins with Kingfisher and interior designers. “Vijay is very clear” that he wants to bring the A380 to India, she said.
“We work a long-term game,” Ms. Mills said. In the airline business, companies do not place an “order for the next year or two and then change your business model totally,” she said.
Unfortunately, that is just what the Indian government is encouraging airlines to do. “Individual customers have been thoroughly pampered all these years,” Praful Patel, the Indian civil aviation minister, said. Airlines need to redefine their business model, he said, and emulate no-frills carriers that are close to breaking even, like IndiGo and SpiceJet.
Indian airlines grew too much, too quickly during the recent boom, analysts say. At its zenith, the industry was adding six planes a month, when there was demand for only half that number, according to the New Delhi office of the Center for Asia Pacific Aviation, a consulting and research firm. To gain market share and attract customers who may never have flown before, airlines were pricing tickets way below cost.
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Adding to their problems, Jet and Kingfisher made expensive acquisitions in 2007 — Jet Airways bought Air Sahara and Kingfisher Airlines bought Air Deccan. Analysts say that the airlines paid too much for the acquisitions and have taken too long to absorb the operations they acquired.
Next, surging fuel prices forced up ticket prices just as the global slowdown cut business and leisure travel. To make things worse, Indian airlines face much higher fixed costs than carriers in many other countries, like fuel taxes that can be five times the global average.
In India, “the big boys today have huge debts, massive fleets, are confronted with a marked slowdown in domestic and on the international side,” said Kapil Kaul, chief executive for the Center for Asia Pacific Aviation in India. And, he said, “there are virtually no funds available.”
Saroj K. Datta, executive director of Jet Airways, said the industry is suffering in large part because it has not reduced capacity enough. His company has cut capacity 20 percent since last year, he said, but the industry’s overall capacity is down only 2 percent to 3 percent, while demand for air travel is down about 11 percent.
“That has resulted in most airlines offering lower and lower prices in the hopes of filling up seats,” he said. But with prices this low, no airline has been able to break even.
Loans from banks that are majority owned by the Indian government have given the big airlines some breathing room, but that money is unlikely to be enough to get them through the downturn.
While Mr. Patel, the civil aviation minister, would not comment on individual airlines, he did say that the government would not block further consolidation or prevent a carrier from closing. Many airlines should have been better prepared, he added. “Some of these guys in the best days didn’t go big time to the markets and raise money,” he said.
Characteristically, Mr. Mallya is undeterred. Kingfisher Airlines “enjoys business from both” low-fare and premium passengers, he said, “which is one of the reasons why Kingfisher Airlines flew more than a million passengers in May 2009.”