A History of Defunct Indian Airlines: Why Major Carriers Fail

The Indian aviation market, despite its rapid growth, has served as a backdrop for the rise and fall of numerous airlines. High-profile collapses, from Kingfisher Airlines to Jet Airways and most recently Go First, highlight the persistent financial and operational challenges carriers face. These events underscore a complex interplay of high costs, fierce competition, and strategic missteps that continue to shape the industry.

The struggles of these defunct airlines in India are not isolated incidents but symptoms of systemic issues. Key among these are volatile fuel prices, aggressive fare wars, and significant debt burdens accumulated through ambitious but often unprofitable expansion strategies. The history of these closed Indian airlines offers a critical case study in the difficulties of sustaining airline operations in one of the world's most competitive aviation landscapes.

The Recent Collapse: Go First

The most recent major carrier to cease operations is Go First, which filed for bankruptcy on May 2, 2023. The airline attributed its failure directly to supply chain issues, specifically grounding 50% of its Airbus A320neo fleet due to failing Pratt & Whitney engines. According to its filing with the National Company Law Tribunal (NCLT), a quasi-judicial body handling insolvency, Go First's total debt to financial creditors reached 65.21 billion rupees (approximately $797 million) as of April 28, 2023. The airline's situation highlights the vulnerability of carriers to problems with original equipment manufacturers (OEMs). Commenting on the filing, India's Civil Aviation Minister, Jyotiraditya Scindia, stated, "The government of India has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved."

Full-Service Giants: Jet Airways and Kingfisher

Before Go First, the collapses of two full-service carriers, Jet Airways and Kingfisher Airlines, sent shockwaves through the industry.

Jet Airways, once India's largest private airline, suspended all flight operations on April 17, 2019, after its lenders rejected a request for emergency funding. At the time of its grounding, the airline was burdened with a debt of more than $1.2 billion. The carrier's financial troubles were exacerbated by its 2007 acquisition of Air Sahara for Rs 1450 crore ($340 million), which was rebranded as JetLite but failed to yield the expected synergies.

Kingfisher Airlines, launched in 2005 with a premium service model, ceased operations in 2012. The airline's downfall is often attributed to high debts, mounting operational costs, and a flawed fleet strategy that involved operating a diverse range of aircraft, which increased maintenance and training expenses. A key financial strain was its 2007 acquisition of Air Deccan, India's first Low-Cost Carrier (LCC), in an attempt to compete in the budget segment. The move ultimately proved to be an unsustainable financial burden.

Systemic Challenges in Indian Aviation

The pattern of airline failures points to several deep-rooted industry challenges.

High Operating Costs

According to the Federation of Indian Airlines, Aviation Turbine Fuel (ATF) accounts for approximately 40% of an airline's operational costs in India, one of the highest ratios in the world. High central and state taxes on ATF put a severe and constant strain on airline finances, making them highly susceptible to fluctuations in global oil prices.

Intense Competition and Fare Wars

The launch of Air Deccan in August 2003 ushered in the era of the LCC in India. The subsequent entry of numerous other budget carriers led to intense fare wars. This aggressive price competition eroded the profitability of full-service carriers like Jet Airways and Kingfisher, forcing them to lower fares without a corresponding reduction in their higher cost structures.

Regulatory Framework

The Directorate General of Civil Aviation (DGCA), India's primary aviation regulator, is responsible for issuing and suspending an airline's Air Operator's Certificate (AOC). The suspension or cancellation of an AOC for failing to meet safety or financial requirements is often the final step that grounds an airline. For carriers unable to service their debts, proceedings are handled under the Insolvency and Bankruptcy Code, 2016, by the NCLT, as seen with Jet Airways and Go First. The complete regulatory framework can be reviewed on the official DGCA website.

Other defunct carriers, such as Paramount Airways, an all-business-class airline, also highlight the market's difficulties. Paramount ceased operations in 2010 following legal disputes with aircraft lessors, demonstrating the risks associated with niche business models in a price-sensitive environment.

Why This Matters

The recurring cycle of airline bankruptcies in India underscores the extreme volatility and financial fragility of the market. For existing and future carriers, it serves as a cautionary tale about the critical need for sustainable financial planning, disciplined expansion, and a resilient strategy to mitigate high fuel costs and intense competition. These failures impact the entire ecosystem, affecting lenders, employees, lessors, and passenger confidence, while also signaling to regulators the ongoing need to address structural cost issues within the industry.

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