Vijay Mallya?s Kingfisher Airlines has not renewed a Rs 100-crore deal with state-run Indian Airlines for ground-handling services. Kingfisher, which signed the deal in 2005, has decided to take care of ground-handling on its own. This move by Kingfisher will hit IA?s revenue.
The two-year contract ended in April this year. IA will lose about Rs 50 crore a year in revenue with the termination of the deal. ?Kingfisher is saving more than 50% through self-handling,? a Kingfisher Airlines executive said.
Aviation industry sources told FE that IA was keen to renew the contract as almost 6% of its revenue came from ground-handling services. The public carrier?s ground-handling revenue grew from Rs 180 crore in 2003-04 to Rs 300 crore in 2006-07. During the last financial year, IA registered a net loss of Rs 500 crore.
The executive cited a decline in the quality of services as the main reason for not renewing the contract. He said an increase in Kingfisher?s fleet size and with IA?s own expansion plans taking shape, the state-run carrier was not being able to provide quality services to its passengers.
IA does not have extra manpower and infrastructure to handle private airlines? ground-handling duties and just about manages to meet requirements. Ground-handling constitutes passenger and cargo handling and security and cabin services.
But, according to the government?s new ground-handling policy that will come into effect from January 2009, private carriers will no longer be able to carry out ground-handling services themselves.