From Jet Airways to Kingfisher, 5 prominent Indian airlines that flew into disaster
These are brands that once ruled the skies before having a grand fall
1. Indian Airlines/ Indian
Indian Airlines, started on 1 August 1953, was one of the flag carriers of India, and was focused mainly on the domestic sector. It also operated on several routes to neighbouring countries in Asia.
Post-liberalisation, Indian Airlines faced tough competition from Jet Airways, Air Sahara, East-West Airlines, ModiLuft and others. The competition became stiffer with the advent of low-cost domestic competitors like Air Deccan, SpiceJet, IndiGo, GoAir and Kingfisher Airlines along with its low-cost arm Kingfisher Red. Yet, till 2005, Indian Airlines was the second-largest airline in India after Jet Airways. The airline even made a record profit of Rs 656.1 million during 2004–2005.
A Boeing 737 of the Indian Airlines in the late 1990s. Image courtesy: Wikipedia
On 7 December 2005, the word 'Airlines' was dropped from the name of the carrier to reflect its transformed attitude and shore up its image. Alliance Air was the fully-owned subsidiary of Indian Airlines.
In 2007, the government announced the merger of both Indian (along with Alliance Air) and Air India (along with Air India Express) into a new entity called the National Aviation Company of India Limited (NACIL), which is now known as Air India Limited and is India's national carrier.
Air India, however, ran into major financial troubles and has not made profits since its merger with Indian Airlines in 2007-08. Its net loss in 2018-19 was Rs 8,556 crore and its total debt is around Rs 80,000 crore. The airline is surviving on taxpayer money, which could have been better spent.
An Airbus A320-200 of the Indian. Image courtesy: Wikipedia
The government has called for 100% stake sale in Air India along with a complete share in two subsidiaries -- the well-functioning Air India Express and the ground-handling arm AISATS.
2. Kingfisher Airlines/ Kingfisher Red
Kingfisher Airlines started operations on 9 May 2005 and had the second-largest market share in the Indian domestic aviation market until December 2011. However, it faced massive debt issues from the very beginning, which eventually saw it crashing down to its demise.
Kingfisher's acquisition of the loss-making Air Deccan in 2007 made matters worse for it and was perhaps the single biggest nail in its coffin. An initial name change to Simplify Deccan and then to Kingfisher Red, and even its promotion as the low-cost domestic arm of Kingfisher proved inadequate and the company reported losses to the tune of over Rs 1,000 crore for three consecutive years.
A Simplifly Deccan Airbus A320 at the Mumbai airport in 2008. Image courtesy: Wikipedia
In September 2011, Kingfisher promoter Vijay Mallya announced that Kingfisher Red may soon cease functioning as it did not believe in low-cost operations any longer.
On 20 October 2012, the DGCA cancelled Kingfisher's licence and on 25 February 2013, its international flying rights and domestic slots were scrapped.
In July 2014, Kingfisher's debts emerged as the top non-performing assets of the Indian PSU banks after it failed to repay loans amounting to over Rs 4,000 crore. On 2 March 2016, a consortium of 13 Indian banks led by SBI moved the Debt Recovery Tribunal (DRT) to get back the amount due to them, including Rs 9,000 crore by Mallya. But by that time, Mallya had fled to the UK.
3. Jet Airways/ JetLite/ Jet Konnect
Jet Airways commenced operations from May 1993 and grew rapidly in a market that was witnessing most private airlines going bankrupt. In 2002, it overtook the erstwhile Indian Airlines in the domestic market share. In the third quarter of 2010, the airline emerged as the largest in India, with a market share of 22.6%. According to Directorate General of Civil Aviation (DGCA) data, in October 2017, Jet (Jet Airways + JetLite) was the second-largest domestic airline after IndiGo, having recorded a market share of 18.01%. The two Jet brands together even had a creditable 13.6% market share in January 2019 just a few months before the company's collapse.
A Jet Airways Boeing 737-800. Image courtesy: Wikipedia
At its peak, Jet had 119 aircraft in its fleet and operated about 600 flights a day. It also employed 22,000 people, including 6,000 on contract. It was also the most successful Indian aviation company in terms of international operations.
In January 2006, Jet expressed its intention to buy the beleaguered Air Sahara for a $500 million all-cash deal. What attracted Jet most towards Sahara was the latter's airline infrastructure and the rights to operate on international routes, especially London and Singapore. The deal would have ensured that Jet got 27 aircraft and a 12% market share.
The deal fell through in June 2006, but was back on track soon and in April 2007, Jet Airways shelled out Rs 14.5 billion ($200 million) for buying Air Sahara.
The new entity was called JetLite and was marketed between a low-cost carrier and a full-service airline. JetLite became a wholly-owned subsidiary of Jet Airways, but the budget carrier started haemorrhaging money. In August 2008, plans were announced to merge JetLite with Jet Airways.
Turbulence started for Jet when it laid off 1,900 out of 13,000 employees in 2008, who had to be re-instated following the civil aviation ministry's intervention.
A Jetlite Boeing 737-800 at Kathmandu airport. Image courtesy: Wikipedia
On 8 May 2009, Jet Airways launched another low-cost brand called Jet Konnect, which operated a fleet of Boeing 737-Next Generation and ATR-72 aircraft and flew on profitable short-haul routes with high passenger load factors. On 25 March 2012, Jet Airways merged JetLite with Jet Konnect and started offering business class seats after the fall of Kingfisher Airlines.
Finally, on 1 December 2014, Jet Konnect was merged with the parent Jet Airways, making the latter the third full-service airline in the country after Air India and Vistara.
Many experts believe that Jet's 2007 takeover of Sahara signalled the start of the end. The amount splurged severely curtailed Jet's ability to spend on facing competition. Another major mistake was Jet's purchase of a mixed fleet of 10 wide-bodied Airbus A330 and Boeing 777 planes. Unlike peers, Jet offered only 308 seats on these planes, much lesser than the global standard of 400 in order to give the passengers a premium experience. This ensured that the company lost one-fourth of the potential revenue.
Since 2008, Jet had to lease out up to 70% of its wide-bodied aircraft to players like Turkish Airlines, Oman Air, Thai Airways, Gulf Air and Etihad.
Jet Airways also took a beating from the highly successful low-cost carrier trio of IndiGo, SpiceJet and GoAir, whom it had underestimated. Under pressure, Jet had to lower prices, which affected its overall performance and resulted in steep financial losses.
Poor management by Jet Airways Chairman Naresh Goyal, who refused to have separate teams running the full-service carrier and budget airline also contributed to Jet's downfall. The lack of a concrete business model confused investors and passengers. The company's decisions were not transparent. It spent more than it earned and kept on accumulating debt.
A JetKonnect plane. Image courtesy: Flickr
This meant that the company could not properly absorb shocks arising from crude oil fluctuations, unlike IndiGo and SpiceJet. Jet also failed to find a strategic investor that could shore up the company's finances with talks with Tata not bearing fruit and Etihad refusing to increase its stakes as Goyal was at the helm. Notably, Jet had sold a 24% stake to Etihad in 2013 for $379 million after it faced its first major crisis in 2011-12.
Continuing Jet Airways soon became next to impossible. As of November 2018, it reported having a negative financial outlook as a result of increasing losses. Even Prime Minister Narendra Modi had called on Jet's lenders to rescue the airline without pushing it to bankruptcy, but the airline never got the agreed stop-gap loan of about $217 million.
According to reports, the airline had been incurring a daily loss of Rs 21 crore and had debts and dues, including unpaid salaries and vendor dues, totalling at least Rs 15,000 crore. It had to ground all its planes after lenders rejected plea for emergency funds. On 25 March 2019, Goyal and his wife Anitha Goyal had to step down from the board of directors.
On 5 April 2019, Indian Oil Corporation cut fuel supply to the airline, citing non-payment of dues. On 17 April 2019, all flight operations were suspended as lenders rejected Rs 4 billion of emergency funding and Jet's membership of the International Air Transport Association (IATA) was suspended too.
Interior of a Jet Airways Boeing 737. Image courtesy: Wikipedia
On 17 June 2019, Jet Airways' consortium lenders led by State Bank of India (SBI) decided to refer the company to National Company Law Tribunal (NCLT) for bankruptcy proceedings under the Insolvency and Bankruptcy Code 2016 after there were no acceptable offers from Etihad Airways and Hinduja Group.
As things stand, lenders would now have time till October 16 to vote on two proposals to revive the bankrupt airline, the Mint reported.
Jet Airways had received bids from two consortia -- one of them is made up of the UK-based Kalrock Capital and UAE-based entrepreneur Murari Lal Jalan, and the other comprises Haryana-based Flight Simulation Technique Centre, Mumbai-based Big Charter and Abu Dhabi’s Imperial Capital Investments LLC.
According to a report in Times Now, the Kalrock-Jalan consortium is ready to pump Rs 1,000 crore into Jet Airways over the next five years. It is also willing to furnish collateral as per the resolution plan.
4. Sahara Airlines/ Air Sahara
Air Sahara was established as Sahara Airlines in 1991 and commenced operations on 3 December 1993 with two Boeing 737-200 planes. The aim initially was to serve north India with its base in Delhi. Later the airline expanded to the rest of India.
Sahara Airlines was renamed as Air Sahara on 2 October 2000. It went international on 22 March 2004 with flights from Chennai to Colombo and later expanded to London, Singapore, Maldives and Kathmandu. It had planned to become the first Indian carrier to start flights to China with service to Guangzhou from late 2006. This, however, did not materialise.
Air Sahara was taken over by Jet Airways in 2007 and a new entity called JetLite was created. According to an Economic Times report, Jet Airways had wanted to run Air Sahara as a separate debt-free company without integrating the two balance sheets. This would have ensured that Jet had no major cost heads except the operating expenses like salaries. It was moreover planned that no group company loans would be on Air Sahara's books and its brought-forward business losses of about Rs 500 crore would be adjusted by Jet Airways for tax benefits.
A Bombardier CRJ200 aircraft of Air Sahara at Ranchi Airport. Image courtesy: Wikipedia
The induction of new capacity post the Jet-Sahara merger was planned to be optimised and JetLite was envisaged as a major player in the Middle East market, which was dominated at that time by the public sector trio of Indian, Air India and Air India Express. This market was seen as a big money-spinner.
Furthermore, being two of the oldest private carriers in India, both Jet and Sahara had control of a significant portion of primetime slots on almost all the major city pairs. Also, Air Sahara had a large hub in Hyderabad -- one of the fastest-growing non-metro cities in India at that time -- where Jet Airways was not a significant player. Jet, on its part, was the biggest operator in the domestic market at that time. So the two companies hoped to gain from a symbiosis between them.
The deal, however, proved to be a major headache for Jet on financial, legal and human resource fronts. JetLite was later merged with Jet Airways' in-house low-cost brand Jet Konnect in 2012, and Jet Konnect, in turn, was merged with the parent Jet Airways in 2014.
ModiLuft was a private airline based in Delhi and was one of India's earliest post-deregulation airlines. It was launched in May 1993 by industrialist SK Modi, in technical partnership with the German flag carrier Lufthansa. Remarkably, it commenced operations within three months of its conception. The German company provided pilots, training, maintenance, overhaul and spares support. Modiluft set the standard for flight safety, ground maintenance and on-time performance and Lufthansa's support contributed to this in a big way.
The ModiLuft logo resembled that of Lufthansa. Image courtesy: Wikipedia
Discord between the two partners proved to be fatal for the airline. The Indian side accused Lufthansa of not honouring its funding commitments, while Lufthansa alleged that Modiluft had defaulted on lease payments of four Lufthansa planes. The relationship started to worsen in mid-1996 after Modiluft started to pressurise Lufthansa to take up a 40% stake in the Indian carrier. In May 1996, Lufthansa declared that it had terminated its agreement with Modiluft.
The aircraft that belonged to Lufthansa were grounded due to litigation and Modiluft acquired Boeing 737-400 planes from Air UK as replacements. But Modiluft could not continue much longer and ceased operations that year itself. It returned Lufthansa's aircraft by the end of September 1997 as part of an out-of-court settlement. The ownership of Modiluft was changed due to lack of funds and the new entity was named Royal Airways, but it never took off. However, ModiLuft's Air Operator's Certificate (AOC) had not lapsed. It was eventually used by a different set of promoters for the low-cost carrier SpiceJet.