The Story of Airlines being Tied to the Ground

Post By : News Desk
Post Date : April 21, 2019
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India is the world’s fastest-growing aviation market that has seen double-digit growth for a continuous period of more than 54 months. Yet somehow, it is also one of the most volatile markets for airlines. Things went into a tizzy when Jet Airways, nation’s one of the biggest airline by market value, had to ground its entire fleet recently following a severe cash crunch. “Since no emergency funding from the lenders or any other source is forthcoming, the airline will not be able to pay for fuel or other critical services to keep the operations going,” the carrier said in an April 17 statement.

Here we are, with an exclusive report on the major airlines that have been shut and grounded in the past decade. The reasons for them being shut are more or less similar, yet the pattern of the Airlines industry can be seen in a more classified and wider perspective post this.

KINGFISHER AIRLINES

United Breweries Group owned Kingfisher Airlines was established in 2003 and started its first commercial operation on 9th May 2005 and first international operation on 3rd September 2008. Things for the Kingfisher Airlines seemed to be at peace until right before the crisis started with the freezing of the bank accounts of the airline by the Indian Income Tax Department. In November 2010, Kingfisher Airlines restructured debt of INR 8000 crore, with all 18 lenders agreeing to cut interest rates and convert part of loans to equity. In November 2011, the airline was attempting for a second debt recast which was, in turn, ruled out by the government. Due to the inability of handling their losses and shifting focus of the airline, it saw an immense downfall.

Not a single CEO of the organisation lasted for even a year, failing which the business suffered a loss being exposed to new ideas every time. It seemed to have lost hold on its way as it was not even able to pay the Airport Authority dues. Kingfisher received a notice from the Airports Authority of India in February 2012 regarding accumulated dues of INR 2,551 million. By 2012, the airline accumulated losses of over INR 70 billion. Kingfisher finally shut down its operations on 20th October 2012 after DGCA suspending its flying license. This suspension had been due to failure to give an effective response to the show-cause notice issued by DGCA.

SAHARA AIRLINES

Sahara Airlines was a passenger and cargo airline founded in 1993 in New Delhi, India owned by the Sahara India Pariwaar. The airline flew to major Indian cities and a few international destinations. In 2001, the airline was rebranded and restructured by its owners with the new name “Air Sahara” which controlled about 12 per cent of India’s domestic flight market during its peak as an independent entity. In late 2003, Air Sahara became the first private Indian airline to offer direct flights to Colombo, Sri Lanka, later to countries like Nepal, Singapore and the Maldives in 2004. Post this, Jet Airways bid to buy Air Sahara for $500 million which Jet Airways later thought was way higher and the merger did not happen. Also, the Indian Aviation Board refused to give regulatory approval for the merger. In 2007 after a few negotiations between the two, Air Sahara was finally acquired by Jet Airways for $340 million. Post the merger it became a low priced airline now known as JETLITE.

AIR CARNIVAL

Coimbatore International Airport based Air Carnival was an Indian regional airline. It was founded in 2013 as a charter airline but soon started scheduling regional operations in South India in the month of July 2016. Air Carnival was being promoted by Coimbatore Marine College (CMC) Group. The primary reason for the downfall of Air Carnival was its inability to settling dues of the Airport Authority of India. The deadline for settlement was mentioned as April 24, 2017, failing which the AAI forced the service operator airline to vacate the office space including the ticketing counter, back-up office space etc. as per the agreement. The airline failed to do so and Airports Authority of India issued directions to the company for vacating the office space for “non-settlement of dues” at Coimbatore airport. The airlines ceased its operations a few days prior to this notice being served on 6 April 2017. At the time of ceasing, it flew to four destinations. As on 19 June 2017, DGCA suspended all of its AOP and the lone aircraft was taken by the lessors. The airline didn’t stay in the market for long and was the third airline to shut down in the period of August 2011 – August 2012.

AIR COSTA

Air Costa began its operations in 2013 as a regional airline flying to a few cities primarily in southern and western parts of the country. The downfall of the airline started with two of its planes being grounded at the Hyderabad airport by GE Capital Aviation Services for defaulting on payments and Airport dues. As per DGCA  data for December 2016, Air Costa had the highest number of cancellations at 13.65 per cent. The major reason for shut down of Air Costa, stated by the Airline’s CEO was lack of service hangars for two of their aircraft in India which led to unsustainable costs henceforth leading to shut down of operations on February 28, 2017.

PARAMOUNT AIRWAYS

Paramount Airways was an airline based in Chennai, India, operating scheduled services which focussed primarily on business travellers. Its hub was Chennai International Airport, from which it started operations in October 2005, having the company headquarter in Madurai. It operated to regional destinations in south and Eastern parts of India until early 2010. The airline ceased operations when legal issues arose between Paramount Airways and the lessors of their Embraer aircraft. Their fleet was seized by the leasing companies. Paramount renewed its operating licence from the DGCA in November 2010 after it was announced to have won their legal battle. However things didn’t have to fall in place for Paramount any longer and its lenders, namely Bank of India, State Bank of India, Central Bank of India, Andhra Bank, Indian Bank and IDBI Bank to whom Paramount owed around INR 550 Crore wrote to DGCA in February 2013, asking the DGCA to prevent airline from starting any operations before settling the previous dues. On 6 May 2016, The CBI had registered the case against promoters of Paramount Airways having allegations of defrauding, diverting loan amount and cheating public sector banks put on their name. Searches were being carried out at several locations including residential and office premises of its promoters, owners and the company functionaries.

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