The sector, one of the most vibrant symbols of India's economic progress, is going through its "worst-ever phase," says Civil Aviation Minister Praful Patel, with airlines facing total losses of two billion dollars this year.
The result is that India's airlines are in shakeout mode with the largest domestic airline, Jet, striking an alliance last week with arch-rival Kingfisher.
The deal includes code-sharing, route rationalisation and pooling crews.
Jet chairman Naresh Goyal said bluntly the tie-up with liquor baron Vijay Mallya's Kingfisher Airlines, known for its five-star service and slogan "Fly the Good Times," was crucial or both would "have gone bankrupt.
"
Jet Airways lost 2.53 billion rupees (52 million dollars) last year while Kingfisher has just reported a nine-month loss of 1.
88 billion rupees.
The cash crisis also forced Jet last week to lay off 1,900 workers, only for the company to perform a dramatic turnaround and rehire the employees following political pr