All carriers, except one, bled over the last quarter and are facing a severe cash crunch.
Figures for the aviation sector are a cause of concern.
During the September quarter, India's largest carrier Jet Airways reported a loss of US$140 million, while number two Kingfisher lost US$92 million.
According to an industry lobby, domestic private carriers have lost a combined US$680 million till September this year.
It is a money guzzling sector and high and fluctuating prices of aviation turbine fuel (ATF) have made it worse. It makes up 50 per cent of operating costs. With the addition of high landing and navigation charges, the profit margins remain low.
India's domestic air market, which was growing at double digits earlier, crashed after the global slowdown, and has not flown into profits since the last two years.
Some airlines have added to their woes with acquisitions gone wrong and by purchasing aircraft without adequate funding.
Government policies and high taxes have also done them in.
Dhiraj Mathur, executive director of PricewaterhouseCoopers, said: "On the one hand, the state government expects the airlines to provide greater connectivity within states even if it is not viable. On the other hand, they levy such huge taxes on ATF. So that is a very valid point. The government periodically says don't raise prices. If it is a free market, then let the market forces determine what the airline does. If it goes under, it goes under."
In September, India's aviation industry was the fastest growing domestic market in the world, with 18 per cent more passengers choosing to fly.
It has now become the ninth largest aviation market.
Ironically though, the high growth rate has also been responsible for the downfall of the industry.
It has led to capacity creation far ahead of demand, leading to excessive aircraft purchases and a fierce ticket price war.
As their profit margins become wafer-thin, airlines have requested the government to either infuse capital or open the sector to foreign investment.
Vijay Mallya, chairman of Kingfisher Airlines, said: "The aviation industry is a capital-intensive industry, it needs more and more equity. We have not come up with a business model that is any different to any global airline and therefore, in order to get that equity, to improve the position of our balance sheets, not just for Kingfisher but for the entire industry, I strongly believe that Foreign Direct Investment (FDI) by strategic investors should be permitted."
With an uncertain economic environment in the West, high interest rates and a weakening rupee, airlines are finding it difficult to raise capital.
Kingfisher wants to import fuel directly to save on taxes.
Jet Airways is planning a sale of some of its aircraft to repay loans.
Other airlines too are planning a sale and leaseback of some of their aircraft.
Facing a severe cash crunch, it will be some time before the aviation industry takes off again.
- CNA/ms
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