India8217;s loss-making airlines sector

Debt-laden Kingfisher Airlines on Friday continued to cut flights.

Debt-laden Kingfisher Airlines on Friday continued to cut flights just as the country8217;s travel season enters its peak period,catching hundreds of passengers off guard,pushing up spot airfares and putting the spotlight on the loss-making sector.

Indian carriers have placed orders worth 50 billion with Boeing and Airbus for aircraft to be delivered over the next decade,borrowing heavily and causing investors to remain wary of the sector.

Here are some facts about India8217;s aviation industry:

The country has six major airlines 8212; Jet Airways,Kingfisher Airlines,SpiceJet,Indigo Airlines,GoAir and state-run Air India.

With the exception of Indigo,all the airlines are loss making.

The three full service carriers 8212; Jet Airways,Kingfisher and Air India 8212; have combined debt of more than 13 billion.

India allows foreign investment in the country8217;s carriers to the tune of 49 percent but foreign airlines are not allowed to invest in them.

Kingfisher and Jet have not been successful in tapping foreign investors in recent years. Billionaire Wilbur Ross invested in and subsequently exited budget airline SpiceJet in 2010,making it the only Indian carrier to get major foreign investment recently.

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India8217;s industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers. Aviation Minister Vayalar Ravi also said his ministry was considering such a plan.

Most mergers in the sector have run into problems as witnessed by Kingfisher8217;s acquisition of the country8217;s first low cost carrier Air Deccan in 2008. The combined entity is yet to post a profit.

Air India has also not posted a profit since merging with former state-owned partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive.

In 2007,Jet Airways acquired Sahara Airlines for 14.50 billion rupees 289.3 million and renamed it JetLite. But both parties have since been engaged in a legal battle over payment issues.

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Air India and Kingfisher have both undergone a debt restructuring process. Kingfisher cut its debt by issuing shares to 14 banks. But banks are wary of lending to large carriers.

Indian states heavily tax sales of aviation turbine fuel,the key input for carriers,and ATF prices for domestic operations in India are higher than international benchmarks.

Indian air traffic was growing at close to 19 percent in the first eight months of the year,according to government data. Analysts expect the pace of growth to continue.

The Centre for Asia Pacific Aviation has forecast a record 2.5-3 billion loss for Indian airlines for the year ending March 2012,with Air India alone likely to account for more than half of it.