India’s Kingfisher Airlines is dead (all claims by founder Vijay Mallya to the contrary) and the vultures are circling its carcass, picking up the scraps as they try to move forward. Air India is hoping to take over several of the old check-in counters at Mumbai’s airport and local LCC GoAir is hoping to move their operations into the terminal where Kingfisher was previously operating. That move would include taking over the office space in addition to flight operations. And Jet Airways has already applied to buy some of the route authorities Kingfisher surrendered when they ceased operations. More than 120 international frequencies to eight countries were idled when Kingfisher shut down.
I’m sad that Kingfisher is dead. I got to fly them in 2005 and had a great time on the short flight; I even still use the small amenity kit case I got on that flight to carry my liquids (yes, it is clear, has a zipper and is less than 1 quart). But they are dead and no amount of hoping or dreaming seems likely to change that. It is about time that the Indian aviation world moves on, letting other carriers take advantage of those resources and growing the markets.
For India‘s Kingfisher Airlines the descent into near oblivion over the past year has been quite dramatic. The latest event – happening this past week – is that their operating license from the Indian aviation authorities has officially lapsed. This comes a few months after the license was suspended due to concerns about their ability to provide "safe, efficient and reliable service."
The carrier is continuing to play down the issues associated with their operations license, noting that they expect the lapsed certificate to be reactivated once they have finalized their new funding plans. Or, as a spokesman put it in a statement:
Kingfisher is confident of securing approval from the regulator on the restart plan, licence approval and reinstatement of its operating permit.
Over the past year Kingfisher has gone from the second largest carrier in India, on the cusp of joining the oneworld global alliance to carrying only 3.5% of the country’s traffic and then being forced to halt operations completely. Along the way there were unpaid contracts, employee strikes and a variety of other problems. The carrier is keeping up appearances as they search for fresh capital but this one seems unlikely to end well.
The much maligned Indian carrier Kingfisher is one step closer to shutting down. The company has had a string of issues over the past year, each calling into question the ability of the airline to survive. The latest step – India‘s government has suspended the carrier’s operating license – is the simply the most recent hurdle Kingfisher will have to overcome if it is to survive. The Indian government had previously forced the airline to stop flying and to stop taking new bookings pending the resolution of concerns over Kingfisher’s ability to provide "safe, efficient and reliable service." This move will make resumption of service just that much more difficult.
The carrier is playing down the significance of the suspension, claiming that resumption of service will happen in the near future, as soon as the issues with the government are resolved. From an official statement:
We have, in any case, always maintained that once the issues with the employees are resolved, we will first present our resumption plan to DGCA for review, before resuming operations.
The carrier would require approximately $1bn to stage a recovery at this point according to analysts. That is a huge sum to invest in a questionable market where cost pressures are tremendous and capacity is far in excess of demand, at least at fare levels which can sustain the operations. Kingfisher formally shutting down would likely be good for the Indian aviation market but a significant loss for Vijay Mallya, the Indian playboy who runs the organization today.
It would appear that Star Alliance remains focused on seeing an Indian carrier join the global alliance, despite issues with prior efforts to integrate Air India into the group. Jet Airways has long been considered the likely candidate to join the alliance but such a move requires the permission of the Indian government. That permission has now been formally requested.
It is hard to know if the Indian authorities have gotten over their state carrier being denied entry into the group sufficiently to allow for a move such as this to happen. That said, they were willing to allow Kingfisher to join oneworld, right up to the point that Kingfisher more or less collapsed on itself. So it isn’t alliances in general which are on the out. Still, the fact that Star Alliance denied Air India entry to the group could be troubling for Jet’s application.
Gaining a partner in the Indian markets will be a huge win for any of the global alliances, assuming any of them can actually make it happen. Access to domestic and regional flights ex-India as part of a marketing alliance is one of the biggest gaps globally today.
Kingfisher was dealt a potential death blow yesterday when the airline was suspended from IATA’s ticketing clearinghouse due to reported non-payment. The clearinghouse is used by hundreds of airlines to process payments for interline tickets and other multi-carrier transactions. Roughly 80% of interline transactions worldwide are settled through the system so being suspended is a huge blow to the carrier.
The company claims the suspension was triggered automatically by the IATA systems when a technical glitch prevented their scheduled payment from reaching the clearinghouse:
As a result of a recent internal system failure, certain credits did not hit our ICH account in time, triggering an automatic suspension. Kingfisher would like to confirm that all its dues via ICH have been settled in full and it has absolutely no outstanding due as of date,
Despite claiming to be current it appears that IATA has not yet commented or reinstated the carrier to the systems.
Adding fuel to the fire is the announcement today that the planned February 10, 2012 ascension of Kingfisher into oneworld is being delayed, with no revised date yet announced. FlightGlobal is carrying the story, with quotes from both oneworld and Kingfisher executives on this latest development. Said oneworld CEO Bruce Ashby:
These are turbulent times for the airline industry in India and many other parts of the world. We have been working closely with Kingfisher Airlines over the past months and it has become increasingly clear recently that the airline needs more time to resolve the financial issues it is confronting before it can be welcomed into Oneworld. Will work with Kingfisher Airlines with the aim of setting a new joining date once it is through this current period of turbulence.
This delay is somewhat reminiscent of the frequent delays that Air India suffered in their attempts to join Star Alliance over the past few years. Those efforts were eventually scuttled after multiple delays.
Without access to interline booking revenue is seems unlikely that Kingfisher will be able to realize the revenue needed to pull themselves out of their financial morass. With many unpaid or severely delayed bills the future of the carrier is very much in question. It is not surprising that the alliance is not interested in bringing the carrier on board as their liabilities for interline travel could be significant.
This is a serious blow for oneworld, as another member carrier, Malev, ceased operations today, also under financial pressures they could not overcome.
Not a good day in the aviation world at all.
Hat tip to Flying With Fish for the head’s up on this one.
Hungarian flag carrier Malev has ceased operations following demands from creditors that certain balances be paid immediately or in advance. The carrier has been struggling for many years; those debts finally caught up. The move grounds the airline’s fleet, stranding several thousand passengers and leaving the company’s ~2,600 employees with an uncertain future. The shutdown was apparently precipitated but ground handlers in Tel Aviv demanding payment up front for services. Similarly, a plane in Dublin was not permitted to depart, supposedly citing the company’s accumulated debt as the reason.
The airline is relatively small, but they do hold 27 routes out of Budapest where they are the sole carrier. While it is likely that other carriers will step in to pick up some of those routes such changes will take time and in the interim a number of passengers will be inconvenienced by the service termination.
The move is also a blow to global alliance oneworld, of which Malev is a member. The group is adding other carriers, including Air Berlin and Kingfisher, but those carriers are also struggling somewhat financially.
This cessation follows that of Spanair from last week. Truly a sad time in the skies over Europe.
Kingfisher and global alliance oneworld have set a date for the Indian carrier to join the alliance. But there still appear to be many hurdles that must be surmounted for that to actually happen. Assuming everything goes as planned the join date is February 10, 2012.
But that’s a rather significant assumption given the way things are going for the carrier lately. They’ve been slashing routes, struggling to pay fuel bills, seeing flight cancelations and otherwise having trouble running their operations. As if that wasn’t bad enough, it was reported today that the company has not been paying its taxes. They’re in the hole $25MM – two years worth of payroll tax withholding – to the Indian government, on top of all the private debt they’re holding. Supposedly there are investors looking to offer a new loan but they’re awaiting reports on the viability of the company. This latest news certainly won’t help those reports.
Not good news at all, either for the airline or the alliance. Oh, and for oneworld there are also the issues of the American Airlines bAAnkruptcy, Air Berlin’s financial struggles and new ownership stake from Etihad and the labor strife at Qantas. Really a lot of uncertainty in that alliance these days.
Posit: People think an airline might be financially shaky.
Consequence: People stop buying flights on said airline.
Result: Pretty soon it is financially shaky.
Conclusion: You can make airlines fail.
Please forgive the paraphrasing of one of my favorite movies, but I thought it was a great view into how things can go awry with an airline. And, in my case, it is nearly exactly what happened.
For our trip to India and Sri Lanka over New Years we needed some local flights. Last time we were in India we flew on Kingfisher and SpiceJet and enjoyed them both and I was quite willing to consider them again for this trip. Kingfisher had flights on the days and times we needed them and they were actually $10-20 less per person than the other cheapest fares available. Yet I still didn’t book those flights. Because Kingfisher has been appearing financially shaky lately.
The company has missed payments on fuel bills and otherwise decided to cut costs, leading to ad hoc flight cancelations randomly. That’s normally enough to cause me to shy away, especially on a trip where our time is limited and there will be some non-refundable expenses outside the airfare. So I booked elsewhere.
A couple of days later I see the news that I probably made the correct choice: one of the routes I was considering booking with Kingfisher is no longer being operated. Whoopsie. Sure, it meant rearranging our schedule a bit in India to skip the COK-CMB route but I did it without hesitation once I saw the potential issues with the Kingfisher flights. And I have no regrets at all.
I’m also not going to pretend that the $150 in lost revenue from me is what caused the flight to be pulled from the schedule, but the coincidence of the timing was awfully convenient.
ps- Bonus points (and maybe a drink chit or two) if you can name the movie.
Star Alliance and Air India announced yesterday that the long-pending integration of the airline into the world’s largest global alliance has been suspended. This is the latest in a series of delays announced regarding the carrier’s intention to join the group.
Star Alliance CEO, Jaan Albrecht said: "With the collective decision to put the integration efforts on hold today we aim to contribute to Air India’s flexibility to concentrate on its ongoing strategic reorientation. In this process our member carriers will continue to provide assistance to Air India wherever required."
It was just a couple months ago that the carrier stated they felt ready to finally join the alliance. Apparently that was all bluff, however. Given the financial turmoil the carrier is currently in the midst of it is not particularly surprising that this move came about.
The real question now for the alliance is what happens in India. Kingfisher has already committed to the oneworld alliance. There had been additional rumors of Jet Airways joining with Star Alliance but that was apparently on hold until Air India could get things figured out. With this latest suspension of the Air India efforts could that open up the opportunity for Jet to make a move?
The air travel market in India is huge and growing rapidly. Getting partners in that market is a very important move for these alliances. Sadly, it seems that Star Alliance latched on to the wrong initial partner and is now paying the price for that decision.