KFA vendors, suppliers left counting their losses

With Kingfisher Airlines’ (KFA) licence being suspended, vendors and suppliers are now left calculating their losses.It has affected the passengers no doubt, with other airlines raising the fares. But, one big impact may be that on the confidence of the global community in dealing with the Indian aviation sector given that it’s the second time that the Indian aviation sector has landed in a crisis. The first being in the early 1990s.

According to a source from the aircraft maintenance industry, over a dozen vendors have their assets (leased to Kingfisher) stuck in India that it can move out only after spending huge sums of money.

“How will the lessors take their aircraft back and if DGCA will not help now. The confidence will take a hit and it will depend on how DGCA handles the sitaution," said a high ranking person from a firm that leases out small aircraft.

The movable assets are covered by the Cape Town Treaty to which India is a signatory. The treaty creates international standards for registration of ownership (including dedicated registration agencies), security interests, leases and conditional sales contracts, and various legal remedies for default in financing agreements, including repossession and the effect of particular states' bankruptcy laws.

Between May 2005 and June 30, 2012, Kingfisher piled up losses of $1.9 billion, according to a report by Sydney-based CAPA-Centre for Aviation.

The collapse of Kingfisher Airlines has seen other airlines reducing the excess capacity, and this has lead to the fares shooting up over 20 per cent. For the winter schedule which commences October 28, Indian carriers will fly 20 per cent less flights than last year. This year there’s been an average of 10,935 vs 13,541 flights per week last year. Experts expect the fares to rise another 10 per cent~15 per cent during winter as the season sees the highest demand.

Kingfisher's plight may also sound alarm bells for Indian carriers, most of which have been bleeding since last year because of the high costs, borrowing rates and the weakening rupee. Having already seen a round of collapse of the Indian aviation sector earlier, in the early part of 1990s, the state of aviation sector is now again in a precarious state.