What could be the reasons for Kingfisher's downfall?

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Vijay Mallya
Bangalore, Dec 8: Almost everyone knows the ongoing financial crisis in Kingfisher airlines, the airlines which is touted to be the second biggest private carrier in India. Successive days of flights cancellation, debt of Rs 7,500 crore and rising, a July-September quarter loss of Rs 469 crore, delayed salaries, pilots quitting, and reports of Chairman Vijay Mallya in negotiations with domestic investors. What do you think, is this because of the mere failure of proper management in Kingfisher airlines? Then you should reconsider your conclusion.

Kingfisher airlines is not the first to suffer the bankruptcy in aviation sector but others have just managed to fly despite the problems they are facing. And some buckled under pressure laid their airlines to rest inside sheds forever.

But what is the problem to make money in airlines business? Let's have an understanding on the most common problems for which aviation industries succumb to closure across the world.

Recently an online news portal, Statesman.com, discussed the problems faced by airlines that eventually lead to their down fall.

As we have understood, the core problem of the aviation sector could be traced to a single cause, that is when Indian government deregulated the airlines industry, taking cue from the US government.

Paul Stephen Dempsey, an expert in aviation and the law at Canada's McGill University, has analysed that barely a decade after the Airline Deregulation Act of 1978 was implemented, the US airline industry lost all the money it made since the Wright Brothers' inaugural fight in 1903.

There was the time when airlines industry flew as the government dictated who could fly where and how much they could be charged, which let the airlines to generate a good profit but tickets were expensive.

But hard times started after the implementing deregulation act, which wide opened the gates for competition. This led for the sharp fall in ticket prices and profit followed the same suit. The old airlines which failed to cope with business model set for the new era by the new competitors, crash landed their airlines once and for all.

Deregulation has not only led to fall of ticket prices but also increased the monopoly and concentration to tenfold. For instance, just four airlines are controlling the two-third of the US market, country that gave birth to the deregulation.

Expensive labor contracts, skyrocketing fuel prices and passengers used to cheap cross-country fares to be blamed for the current crisis. Other times, costly planes, fears of terrorism and even outbreaks of disease adds to the woes of ailing aviation.

Recession - when people endure the unemployment difficulties by default, airlines lose passengers.

There are many lessons which Indian aviation have failed to learn or still being defiant to those reasons led to the sorry state of few airlines. Some anti-competitive, greedy airlines in order to control huge aviation market cause unhealthy competition, that eventually raise economical pressure.

But India has removed the Monopolies and Restrictive Trade Practices Commission from aviation markets, under the guidance of PM Manmohan Singh. However, the government have shown no will to appoint the promised Competition Commission.

Don't know how many airlines will have to face bankruptcy before the government wakes up.

As they say, if you keep doing what you're doing and you're not getting what you want out of that. Then you have to stop doing what you're doing and start doing what you must be doing.

Lets see when the government will embrace this statement and properly act to help airlines out of crisis.

OneIndia News

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