As Kingfisher Airlines
continues to teeter on the brink, let's take a look at what its going under would mean for Indian aviation. One thing that's almost certain if the Vijay Mallya
-owned airline does fold up is a rise in fares. As per a Kotak Institutional Equities report dated March 19, the average one-week forward fares for the January to April quarter are quite similar to those in the strongest of all quarters i.e. between October to December. The fares between January and March are usually lower by five to seven per cent compared to October to December, which is essentially the peak travel time in India.FULL COVERAGE:How Kingfisher landed itself in the mess
Kingfisher's going under could also give either Jet or IndiGo
a larger share of the market, and hence a bigger say in terms of pricing power. A few months ago, the market was divided in such a way among the six carriers that no single carrier had a significant chunk of the market and hence could not alone raise fares. But the situation has been changing over the last few months with Kingfisher's steadily depleting operations; and fares holding up at peak season levels only reinforces this.
The other near-certainty if Kingfisher were to lose its license is its competitor airlines would get a better chance at improving their profitability. The way Kingfisher has cut flights and aircraft over the last few months - from 63 aircraft in October last year to 28 in February to 16 as of now - has only meant more fliers to its competitors, especially Jet Airways and IndiGo. This combined with the other airlines inducting very few new aircraft over financial year 2013 means even better passenger numbers per aircraft for the five carriers except Kingfisher. With fares holding at peak season levels, fewer aircraft and one competitor less, the other five airlines do have a better shot at making some money.
Whether passenger numbers might be impacted because of this is another story. Growth in number of passengers has slowed from a peak of 20 per cent in August to about eight per cent in December. One can't help but notice that the fall coincides with Kingfisher cutting capacity - passenger growth stood at nearly 17 per cent in October (the carrier had yet to announce its first cut in capacity veiled under Kingfisher Red's retirement) to eight per cent in December, by which time the number of aircraft operated by Kingfisher reduced to about 50 from 63. Of course the poor economic mood and the low availability of good (cheap) deals are also behind this tapering of passenger growth numbers.
What Kingfisher's folding up also means is that the aviation business allows very little room for making mistakes, especially in India where the regulatory framework does little to ease the pain. And Mallya, sadly, has more than a few mistakes under his belt - from a flip-flop in models to growing far too rapidly to mismanaging the airline. One of his former executives on the condition of anonymity says, "The airline expanded far too rapidly for its own good. This (downfall) was inevitable." Another former executive, when prodded to provide the main reason for Kingfisher's uncertain state, lays the blame on mismanagement.