Fate of Airline Industry in India (Apr 2020)

Industry Scenario (Ref 1)
The Aviation sector in India currently contributes $72 bn to GDP.

India has 464 airports and airstrips, of which 125 airports are owned by Airport Authority of India (AAI). These 125 AAI airports manage close to 78% of domestic passenger traffic and 22% of international passenger traffic.

Passenger traffic in India stood at 316.51 mn during April 2018 - Feb 2019. Out of which domestic passenger traffic stood at 252.92 mn while international traffic stood at 63.59 mn. The aircraft movement, passenger traffic and freight traffic increased by 4.9%, 4.5% and 3.1% respectively in February 2019 viz-a-viz February 2018, across all Indian airports taken together.

However, the share of international cargo traffic is much higher at 68.5% in comparison with 31.5% of domestic cargo traffic.

Maintenance, Repair & Overhaul (MRO) industry is expected to grow to $1.2 bn by 2020 from $950 mn currently.

NUMBER OF AIRLINES CLOSED EVERY FIVE YEARS BETWEEN 1991-2020 (Ref 2)

2016-2020: 6
2011-2015: 9
2006-2010: 10
2001-2005: 1 [Gujarat Airways operated from 1995 till 2001.]
1996-2000: 11
1991-1995: 5

NUMBER OF AIRLINES CLOSED EVERY TEN YEARS BETWEEN 1929-1990

1981-1990: 1 [Pushpaka Airlines operated from 1979 till June 1983.]
1971-1980: 3
1961-1970: 4
1951-1960: 6
1941-1950: 5
1931-1940: 3

Indian State Air Service was started in 1929.
A total of 64 airlines closed in the lifetime of Indian Aviation from 1929 till April 2020.

Case Study "Jet Airways" (Ref 3)

Jet Airways (India) Ltd. is a bankrupt and grounded Indian international airline based in Mumbai, India which, on 17 April 2019, ceased all flight operations with its last revenue flight operated by a Jet Konnect Boeing 737 arriving into Mumbai on 17 April 2019. From the third quarter of 2010 onward, Jet Airways was the largest commercial passenger airline in India with a passenger market share of 22.6%. With its competitors, mainly SpiceJet and IndiGo, lowering ticket fares in the following years, it was forced to follow suit, hurting overall performance resulting in steep financial losses. It dropped to second place behind IndiGo in October 2017, with a passenger market share of 17.8%. The downward slide continued and resulted in bankruptcy.

BANKRUPTCY AND CESSATION OF SERVICES

As of November 2018, Jet Airways has been reported to have a negative financial outlook due to increasing losses. In March 2019 it was reported that nearly a fourth of Jet Airways' aircraft were grounded due to unpaid lease rates. On 25 March 2019, Mr. Naresh Goyal and his wife Anitha Goyal stepped down from the board of directors.

On 5 April, Indian Oil Corporation stopped supplying fuel to the airline, citing non-payment of dues as the emergency funds have still not been credited. On April 17, the airline suspended all flight operations, due to lenders rejecting Rs 4 billion of emergency funding and its membership in the International Air Transport Association (IATA) was suspended. On 17 June, after getting no acceptable offers from Etihad Airways and Hinduja Group, lenders to Jet Airways decided to refer the company to National Company Law Tribunal (NCLT) for bankruptcy proceedings with debt of $1.2 billion.

As the group faces insolvency proceedings in Netherlands after failing to pay two debtors, NCLAT (National Company Law Appellate Tribunal) has allowed cross-border insolvency proceeding stating in an order that the "Dutch Trustee (Administrator) will work in cooperation with the 'Resolution Professional of India."

Case Study of latest entrant in the Scheduled Airlines: "Vistara" (Ref 4)

Tata SIA Airlines Limited, operating as Vistara, is an Indian full-service airline, based in Gurgaon, with its hub at Indira Gandhi International Airport. The carrier, a joint venture between Tata Sons and Singapore Airlines, commenced operations on 9 January 2015 with its inaugural flight between Delhi and Mumbai. The airline had carried more than two million passengers by June 2016 and as of May 2019, has a 4.7% share of the domestic carrier market, making it the 6th largest domestic airline. The airline serves 34 destinations with a fleet of Airbus A320, Boeing 787-9 and Boeing 737-800NG aircraft.

Case Study of latest entrant in the Regional Airlines: "TruStar" (Ref 5)

TruStar is an Indian low-cost airline promoted by Turbo Aviation Pvt Ltd based in Hyderabad. The airline plans to launch operations by the second quarter of 2020 with Dornier 228 aircraft.

In December 2019, Turbo Aviation announced that it had secured a £100-million ($133.64 million) investment from a Business Group based in the UK for the launch of commuter air services under the third place of the UDAN scheme. The airline plans to start operations with the routes they have secured under UDAN, with plans to connect passengers all over India and eventually overseas destinations in the future. The TruStar fleet will include 10 ATR-72s, 10 Airbus A320 and 4 Dornier 228 aircraft. In January 2019, under the third round of the Governments Regional Connectivity Scheme, also known as UDAN, TruStar had been awarded four routes in Uttar Pradesh, three routes across the States of Andhra Pradesh, Telangana, Tamil Nadu, Karnataka and Goa, two routes between Hyderabad and Prakasham Barrage of Andhra Pradesh and between Chennai and Ramnad in Tamil Nadu and also routes connecting Raipur, Rourkela, Jharsuguda and Jagadalpur with Bhubaneswar, Visakhapatnam and Hyderabad. In Telangana, Turbo Aviation has been given permission to start services from Hyderabad to Nagarjuna Sagar, which will be a sea plane route.

TruStar will be the first private airline to introduce the Dornier 228NG built in India at Kanpur by Hindustan Aeronautics Ltd. (HAL) into scheduled commercial services in India. 

Functioning Airlines and Their Debts

1. Air India: INR 58,283 crore (Ref A)
2. Vistara: No debt. Posted a loss of INR 830.80 crore in 2019 (Ref C)
3. Air India Express: INR 23,286.50 crore (Ref A)
4. GoAir: INR 1,820 crore (INR 18.2 billion) (Ref D)
5. Indigo: INR 1,98,418 crore (Ref E)
6. SpiceJet: INR 974.57 (Ref F)
7. AirAsia: No debt. Posted a loss of INR 670.93 crore in 2019 (Ref C)

References 
Ref 1: https://www.investindia.gov.in/sector/aviation
Ref 2: https://en.wikipedia.org/wiki/List_of_defunct_airlines_of_India
Ref 3: https://en.wikipedia.org/wiki/Jet_Airways
Ref 4: https://en.wikipedia.org/wiki/Vistara
Ref 5: https://en.wikipedia.org/wiki/TruStar
Ref 6: https://en.wikipedia.org/wiki/List_of_airlines_of_India

Ref A: Air India sale: Debt burden on buyer to be Rs 23,286 crore
Ref B: Vistara pares losses as sales rise 54% in FY18
Ref C: How Vistara, AirAsia India fared
Ref D: India Ratings Affirms Go Airlines (India) at 'IND A-'; Outlook Stable 
Ref E: Indigo posts net loss of Rs 1,062 crore
Ref F: SpiceJet Ltd. Balance Sheet