The history of low-cost airlines in India is, to say the least, pretty miserable. It's to list the success stories is much simpler than to list the failures: there have been no success stories. The best that can be said for any low-cost carrier in India is that they are hanging on by their fingernails. Grand designs, such as Kingfisher's international expansion, have ended in failure and a retrenching to, basically, a domestic airline.
Kingfisher is grounded and has been since October 2012. Mallya, always the big talker, says it will be back in the air by summer 2013. That will depend on whether it can pay its bills. And get it aircraft fully into approved working order. Planes that sit around for months don't usually fly with no faults.
In any case, if it gets authorisation to fly again, it is likely to be subject to strict conditions: in the months preceding its decision to stop flying (not that the decision was entirely its own - its bunkering services were cut off and pilots were having to pay for fuel in cash) whether a plane flew as scheduled was something of a hit-and-miss affair.
Kingfisher has long outstanding salaries: its famously pretty stewardesses are among those who were not paid for several months, eventually deciding that they would no longer fly without pay. Pilots agreed. So, no fuel, no flight and no cabin crew : yeah, right. Kingfisher voluntarily made the decision to stop flying. Oh, and no spare parts, either - and no mechanics because they refused to work without pa, too. Indian authorities - in the shape of the Directorate General of Civil Aviation (DGCA) - let Kingfisher continue far beyond any reasonable expectation that it could continue to operate. But now the DGCA has said that it will not get its licence renewed until all outstanding salaries are paid.
There is also the thorny problem that the Kingfisher fleet is being clawed back, bit by bit, as leasing payment defaults worsen. Kingsisher owns only about a dozen aircraft: the rest of its fleet is leased and repossessions started in late 2011. In December 2012, a leasing company began legal proceedings against both Kingfisher and the regulator saying that repossession was being obstructed.
It is into this hole that AirAsia is considering stepping, if it can find a suitable local partner, media reports say. The plan, if the reports are true, is that AirAsia would hold 49% (the maximum allowed under Indian rules which applies local ownership rules to many industries) and one or more local groups would own the rest.
There is some merit, at least superficially, in the plan. AirAsia is regarded as one of the best managed companies in Asia. All of it. There is a pool of staff, trained on the Airbus aircraft AirAsia uses and there is a pool of nearly-new (in aircraft terms) Airbus equipment some of which have already been repossessed for non-payment of lease payments by Kingfisher.
But what Kingfisher has are slots. And those slots might be of value to AirAsia. The reason is simple: India might be a dreadful idea because of corruption, inefficiency and government interference. But AirAsia is slowly building a near-global network based on, mostly, short-ish hops. It is possible that, if it gets to take-over Kingfisher's licence, and its slots, that India will prove a jumping-off point into several EU countries. AirAsia's X division has had some success but its attempts to function into Europe were plagued with high taxes and landing fees which rendered its business model unsustainable. It also gave up on its India flights due increased costs at Hyderabad, Mumbai and Delhi but also due to problems with visas for Indians travelling to AirAsia X's home base, Malaysia. But with a change in visa policy, some small improvement may be seen.
Kingfisher, too, found London (and beyond) too much to handle. One thing is sure: AirAsia's bosses rarely take any action based on anything but a very carefully calculated risk assessment. Sometimes, to those with less information (including us) it often seems like a gamble.
The planned 300% + increase in landing fees and passenger tax at both Mumbai and Delhi have not resulted despite the modernisation of both airports. The airports were already, it was reported, amongst the most expensive in the world.
In recent years, AirAsia has built on its original Malaysian airline base and no owns, wholly or with local partners, AirAsia branded airlines in Indonesia, Thailand, Japan, Philippines.
Recenelty, AirAsia announced the withdrawal (or suspension - both terms are used in its announcement) of its daily Kota Kinabalu (Malaysia) to Clark (Philippines) route, saying that it is unprofitable.
Whether AirAsia can mount some kind of take-over for those parts of Kingfisher which benefit it is pure speculation on this newspaper's part. It's interesting that, within hours of the news of AirAsia business, Mallya made his comments about Kingfisher being back in the air "in summer" - backing them with claims that there would be new, big investors.
One has to ask a simple question: if there is money to be made available in the Indian sector, are investors more likely to back AirAsia or Kingfisher? Based on performance, it's a no brainer.
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Have your say: is India a move too far for AirAsia?
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