Indian airlines will continue to find it hard to make money despite the growth potential of the country's aviation market, according to DVB Bank.
The high level of state and federal taxes on fuel, and the poor state of most of the country's airport infrastructure are some of the major challenges for India's airline industry, says Bertrand Grabowski, a member of DVB Bank's board of managing directors.
"India is a typical market where, on paper, you can grow, but the reality is extremely different," he says.
While competition in the market has lessened since Kingfisher Airlines was grounded in October 2012, he adds that the recent change in foreign direct investment policy, which now allows foreign airlines to take up to a 49% stake in domestic carriers, will likely result in more new entrants coming into the market.
DVB is in a legal dispute with India's directorate general of civil aviation, which has refused to deregister two Airbus A320s parked in Istanbul that the bank repossessed from Kingfisher in August 2012.
That incident led the bank to suspend financing aircraft for Indian carriers, and Grabowski says that apart from the two A320s, it no longer has any aircraft under finance based in the country.