India’s unfriendly skies

BANGALORE — Not long ago, passengers of India’s airlines were spoiled with choices. One promised to treat them like a maharajah. Its passengers were greeted curbside by friendly staff who eagerly took their bags. Once aboard, glamorous female flight attendants waited on the passengers.

Another offered meal choices from a list so long that it ran off the page, even on flights that lasted less than two hours. A third had fares so low that thousands of train passengers found it cheaper and faster to fly.

“I always felt like royalty when I traveled, it was all so unreal and fantastic,” said Janaki Murali, a frequent flyer who works with one of India’s largest outsourcing firms based in Bangalore.

Alas, it was also too good to last.

Last week, a grouping of 10 private carriers — including popular upstarts Kingfisher Airlines and Jet Airways —  threatened to stop operations for a day on Aug. 18 to draw attention to their sorry financial plight. A strike, they reasoned, would be a dramatic way to get the attention of the goverment.

And with reason. Private airlines have been a key part of India’s economic boom: they ferry more than half of the country’s passengers.

But the carriers are hurting, due to a combination of slower economic growth and government policies. State taxes make jet fuel 60 percent more expensive, one of the highest tax structures in the world. (The government uses the funds to subsidize the cost of others fuels such as kerosene and diesel for poorer Indians.)

Private carriers have long lobbied the government to reduce these aviation fuel taxes, as well as high airport charges, so far to no avail.

Vijay Mallya, the flamboyant owner of Kingfisher Airlines — which is named after Mallya’s beer brand — said India’s airlines were being "taxed to death."

For now, the crisis has been averted. A public outcry and a tough-talking government forced the private airlines to back off from their strike plan. The Federation of Indian Airlines (FIA) said that the boycott was canceled “in view of the agitated public sentiment” and the government’s call for a dialogue.

But some of the private airlines’ woes have been their own doing. During the aviation boom of the last few years, private airlines have proliferated.

Many airlines, including Kingfisher and Jet Airways, have built up excess capacities, even as cut-throat competition and falling demand for air travel have eaten away their profits. The FIA said India’s airlines lost $2 billion during the last financial year.

But even as private airlines demanded the government ease some of their financial burden, Delhi is considering handing a $3 billion bailout package to the national carrier, Air India.

The bloated state-owned airline is a loss-maker crumpling under its own debt. Air India has 147 aircraft but about 47,000 employees — making it the most profligate employee to aircraft ratio in the world.

Meanwhile, private airlines are also pushing the government to ease the current rules that ban foreign carriers from buying a stake in domestic airlines.

For many, foreign investment appears the only hope for raising funds, a challenge at a time when the biggest global airlines are themselves cash-strapped.

Clearly, the days of big orders for planes, new routes and lavish marketing budgets are over. Right now, India’s airlines are just fighting for survival.

For passengers like Janaki Murali, who had quickly gotten used to the premium service and an abundance of flight choices, that is a hard landing indeed.

Editor’s note: This story was updated to reflect a change in the total amount of airline losses over the last year.