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Mounting losses, legal battle ground Indus Air

Mounting losses, legal battle ground Indus Air
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First Published: Sat, Mar 24 2007. 01 14 AM IST
Updated: Sat, Mar 24 2007. 01 14 AM IST
Indus Air, India’s smallest airline, has suspended all flights amid an ongoing court battle over cancelled leases on its two-aircraft fleet, a senior official at the airline said on Friday.
The suspension of the barely one-year-old airline’s operations came weeks after buoyant airline officials launched a Delhi-Amritsar regional flight and announced plans to add eight more jets to Indus’ fleet at a cost of about Rs100 crore.
Instead, one of its Canadian Regional Jets (CRJ) was decertified for operations by theDirectorate General of Civil Aviation for lack of spare parts, while the other CRJ was forced out of operations on 21 March.
Wing commander (retd) Suresh Beri, a general manager at Indus, declined to comment on the court case, saying the airline felt that the CRJ-200 aircraft it had chosen were not economically viable.
“We were losing to the tune of Rs5-7 lakh a day, and the management has decided that these aircraft are not fit for our needs,” said Beri. “Ultimately, in the last two-three months, we have undergone a tremendous amount of loss and there is no point in continuing.”
Beri said he hoped that in four months the airline would be able to start flying again, but gave no details on where extra financing would come.
Even though the airline was no more than a niche player in the crowded aviation market, Indus Air’s troubles came as a warning for India’s mostly loss-making airlines.
“The smarter companies will take a look and realize that unless they keep their financials and costs in check, the consequences can be fatal,” said Peter Negline, a Hong-Kong based analyst for JP Morgan.
Even though the airline leasing market has been hospitable to India’s airlines lately, many financiers said they had some concerns about the financially weaker airlines being able to make all their payments regularly.
Close to half of the aircraft operated by Indian carriers are leased from international airline financiers like the Royal Bank of Scotland (RBS), General Electric Commercial Aviation Services (GECAS) and the International Lease and Finance Corporation (ILFC).
It is unlikely that Indus Air’s woes would have “a ripple effect” on the bigger airlines, said Negline, but he added that it was a “timely reminder of how the Indian airline industry is struggling to find a stable structure”.
It is not clear if Indus Air had been able to make regular payments on its leases to GECAS, but Beri said its leases had been cancelled and “a court case is going on”.
GE officials did not return calls late on Friday night. The monthly lease payments for each of the airline’s two CRJs was about $108,000 (Rs47.5 lakh).
A deputy general manager at Indus Air’s Mumbai office said the regional jets were flying at only about half of their 50-seat capacity, and made only one round trip on its Delhi-Chandigarh-Mumbai route. On an average, the tickets cost about Rs5,000.
The airline launched—in several spurts and starts—in 2006, with an all-regional jet fleet, and retired Air India employees on its managerial staff. According to media reports during its launch, the company shared pilots with Air Sahara, a larger airline that has about 7% market share and flies some regional jets on its smaller routes.
Tarun Shukla contributed to this story
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First Published: Sat, Mar 24 2007. 01 14 AM IST
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