The Indian regional airline Alliance Air, which has repeatedly received financial support from the government in recent years, is once again facing massive economic challenges. Despite several government cash injections, the airline is struggling with an immense mountain of debt and operational difficulties that make its future seem increasingly uncertain.
Alliance Air, a former subsidiary of the once state-owned airline Air India, has received massive financial support from the Indian government in recent years. Just last year, 6 billion INR (about 71,6 million USD) was pumped into the airline. However, these funds were mostly used to pay interest on existing debt, suggesting that the airline is deeply in debt. According to sources in Indian newspaper Financial Express, Alliance Air is now seeking another 7 billion INR (about 83,5 million USD) to meet its financial obligations and maintain operations.
Alliance Air's debt mountain now amounts to around INR 40 billion (around USD 477,2 million). This high level of debt, combined with ongoing problems in the supply chain, poses enormous challenges for the airline. In particular, problems with the maintenance and availability of aircraft engines have led to several aircraft being grounded, which has significantly affected operations.
View of the fleet and route network
Alliance Air has a fleet of 21 aircraft, mainly made up of ATR turboprops. This fleet consists of two ATR42-600s, 18 ATR72-600s and one Do228-200. The ATR72s form the backbone of the fleet and are responsible for operating most of the routes. However, six of these aircraft are currently out of service due to engine problems. This exacerbates the situation for the airline, as it not only has to accept flight cancellations, but also loses revenue from the affected routes.
Alliance Air's route network includes 59 destinations, most of which are within India. This includes less frequented airports that are of great importance for regional connections. The airline also serves Jaffna Airport in Sri Lanka, which represents its international flight traffic. Although the focus on regional connections is an important part of the business model, it also results in low margins, which, combined with high operating costs and debt, lead to a precarious economic situation.
The role of the government and Air India Assets Holding Ltd.
The government plays a central role in Alliance Air's future. In addition to the cash injections so far, there are considerations to sell Air India's non-core assets and debt, which includes Alliance Air, in 2025. These assets are currently managed by Air India Assets Holding Ltd. (AIAHL), a special purpose vehicle set up after the privatisation of Air India to take over the debt and non-operating assets.
The planned sale of AIAHL could be a crucial turning point for Alliance Air. A sale could attract new investments and possibly stabilize the airline. On the other hand, it could also mean the end of the airline if no interested parties are found or the terms of the sale are not attractive enough. The uncertainty surrounding this sale certainly contributes to the unstable situation of the airline.
Challenges in the future
Alliance Air faces an uncertain future. The combination of a high debt burden, operational difficulties and dependence on government support complicates the situation. The supply chain problems, in particular the engine problems on the ATR72 aircraft, are further exacerbating the situation. These problems could damage the airline's reputation in the long term and lead passengers and partners to seek alternative solutions.
In addition, competition in the Indian aviation industry is fierce. While low-cost carriers such as IndiGo and SpiceJet continue to expand and gain market share, Alliance Air is struggling to maintain its niche in regional air travel. The airline therefore needs to not only get its financial problems under control but also clearly define and strengthen its position in the market.
Alliance Air is in the midst of an existential crisis. The need to raise additional funds to maintain operations shows the urgency of the situation. The coming months and years will be crucial in determining whether the airline manages to stabilize and possibly even grow, or whether it collapses under the weight of its debt. The role of the Indian government and the decisions surrounding the planned sale of Air India Assets Holding Ltd. will be of central importance.
and 