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The Kingfisher Airlines debacle: But is Vijay Mallya the only culprit?
Just two days after he had tweeted that he was an international businessman and not an absconder, liquor baron Vijay Mallya on Sunday said that he had already been branded a criminal in the country, hence it was not the right time for him to return back.

On Friday the Enforcement Directorate (ED) had issued summons to Mr Mallya to appear before it on March 18. But Mr Mallya's statement issued on Sunday clearly indicates that he is most unlikely to heed to the ED's summons.


Vijay Mallya's statement said, "I hope that I return one day."

"But apart from the hype and controversies surrounding the now defunct Kingfisher Airlines, it would not be out of place to make a deep assessment of the Indian aviation industry, which continues to be marred by heavy taxation and complex regulations.

Seven jets of the failed Kingfisher Airlines Ltd continue to rust away on a southern Indian airfield, as relics of the failed ambitions of the former billionaire and liquor baron Vijay Mallya. These jets had been damaged in the Chennai floods last year.

At its peak, Kingfisher Airlines had become India's second largest airline, but now the airline owes US$ 1.36 billion in debts. The airline shut shop in October 2012 after recurring losses for five consecutive years in a row with ever mounting debts. The employees kept protesting against unpaid wages while the lenders unsuccessfully kept trying to revive the carrier.

Even though India is touted as the fastest growing civil aviation market in the world, and many regulatory changes have taken place after the demise of Kingfisher in 2012, civil aviation experts feel that the regulatory changes are still inadequate.

Although a decline in global fuel prices has increased profits in a few airlines, which had been accumulating losses to the tune of US$ 10 billion in the past seven years, it is the taxation policy and governmental restrictions which are hampering the growth of the Indian civil aviation industry, a cause for which Mallya had lobbied hard, but all in vain.

Kapil Kaul, the New Delhi-based South Asia chief executive officer (CEO) at market researcher CAPA Centre for Aviation said, "Regulatory and policy roadblocks, coupled with a very negative fiscal regime and high jet-fuel prices, did create serious financial and viability challenges for Kingfisher. Some of those issues still remain in the industry."

Taxation policies have ensured that jet fuel prices in India are still the highest in Asia and another added hurdle are the restrictions imposed on airlines for operating on international routes, limiting growth and pushing up costs.

60-year old Mallya has said that the Kingfisher Airlines was an "unfortunate commercial failure" caused by macro economic factors and government policies. However, analysts like CAPA's Kaul and Robert Mann, a former director of American Airlines Group Inc, feel that poor management is also a major reason for Kingfisher Airlines going bankrupt.

In October last year, the government unveiled a plan for an overhaul of the aviation rules, and believe it or not, some rules have existed since 1930s. The government aims at boosting growth in a market which Boeing Corporation expects will require 1,740 new jets worth US$ 240 billion in the next 20 years. Till last year, India was the fastest growing civil aviation market recording a growth of 20 per cent in comparison to China's 10 per cent and less than 5 per cent in the US, according to International Air Transport Association (IATA).

Although the Central government's policy directive asks the states to lower the taxes on aviation turbine fuels, the state governments don't implement it fearing revenue loss. Another problem is that in India, which is one of the least penetrated civil aviation markets in the world, air travellers are perceived as the elite class, capable of paying higher taxes, making it a politically sensitive issue.

Owing to provincial taxes as high as 30 per cent, aviation fuel prices in some Indian cities is highest in the world. While a liter of aviation fuel costs 77 cents in New Delhi, it only costs 52 cents and 62 cents in New York and Sydney respectively. Higher airport tariffs is another factor which continues to burden airlines operating in the country.

It was only due to a drop of 25 per cent in crude oil prices in January 2015, that Indian carriers SpiceJet Ltd and Jet Airways India Ltd were able to end years of losses. In 2014, SpiceJet had even been compelled to ground its fleet due to losses.

In 2008, Mallya had opted for buying budget Indian carrier Air Deccan to sidestep a government rule which prohibits an airline from operating overseas unless it has a fleet of minimum 20 aircraft and has completed at least 5 years of service. As a short term benefit, Kingfisher became India's second largest airlines, but in the long run due to rising operational costs, it soon began to run out of money.

Another major regulation which hurt Kingfisher Airlines was prevention of foreign carriers from having stakes in Indian carriers. Mallya had said that he held advanced talks with foreign airlines from buying into Kingfisher, but at that point of time the regulations negated the possibility. But now, the changed regulations have allowed Etihad Airways to have a stake in Jet Airways, and have also allowed Malaysia based AirAsia and Singapore Airlines to start local subsidiaries.

Today the "hysterical witch hunt" of the fallen liquor baron is on at full swing, with the media, unpaid employees, lending banks and politicians joining the row. Forbes, which had ranked Mr Mallya as the 45th richest Indian with a net worth of US$ 1 billion has removed him from the list. In his hey days he was even compared with the Virgin Atlantic boss Richard Branson, but now the tables have turned for him.

Vijay Mallya, many allegedly claim fled the country on March 2, 2016, with no intention of coming back. Bad management, extravagant spending and embezzlement of funds are a few allegations against Vijay Mallya, which many claim led to the downfall of Kingfisher Airlines. But what cannot be totally ignored are the government policies and regulations which too played their part in this debacle of an airline.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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