For those who have tracked the Indian aviation market over the last few years, the recent developments at Jet Airways may perhaps be a déjà vu moment. Ironically, just as India is basking in its status as one of the fastest growing aviation markets in the world, comes the news that there is trouble brewing at Jet Airways, one of India’s leading airlines with around 14.1% market share.
Not too long ago, Kingfisher, an airline with the second largest market share in India until December 2011, suddenly shut operations in October 2012, leaving a trail of destruction and permanently sullying India’s reputation in the aircraft leasing world. Then came the Spicejet scare in 2014, when the airline came close to shutting down with substantial net worth erosion, before a miraculous turnaround was masterminded by an ownership change. Last month, in October 2018, India’s largest domestic carrier, IndiGo, reported its maiden quarterly loss since it went public, owing to higher jet fuel prices and a weak rupee.
The entire aviation sector has been hit by rising fuel prices, depreciation of the rupee and rising debt service costs to fund aircraft purchases. While India’s Civil Aviation Minister has made it clear that private airlines have to deal with issues facing them on their own and the government’s role can only be at the policy level, he mentioned that the Civil Aviation Ministry is working to bring the aviation turbine fuel under the Goods and Services Tax (GST) regime, which may provide some relief to the airlines.
For more information about India’s aviation growth story, please contact your Ally Law lawyer.