Depressing financial results from India’s second largest airline Tuesday intensified debate about the future of the industry and the level of government involvement. Kingfisher Airlines, owned by liquor mogul Vijay Mallya, who flirted briefly with financing Epic Aircraft in 2007, is drowning in high-interest debt and losing money and Mallya says the answer is to ease government regulations, specifically those banning foreign airlines from investing in domestic airlines. The government is torn between bailing out Kingfisher and other airlines that are also in tough shape to save face or let the market determine the winners and losers.
According to The Wall Street Journal, only one Indian Airline, budget carrier IndiGo, is profitable. The others have fallen victim to high fuel prices, debt costs, currency exchange and a withering fare war that has slashed revenue. Mallya said he’s cutting unprofitable routes and trimming costs where he can but he needs government help, such as a reduction in state taxes on aviation fuel. “It is a very challenging environment,” he said. “The state governments are enjoying windfall profits directly at the cost of the aviation industry … This is something that needs serious attention of our state governments and our central government.”
