The poignant drama of Jet Airways’ beautiful air hostesses ended happily. Naresh Goyal, who had dismissed them, saw their tears, could not sleep at night, and took them back the next day. National Aviation Corporation was more diplomatic — it gave its workers the choice of taking five years’ leave without pay. Hopefully, they will start their own bars or temples, and get so rich that they will not come back. But these are palliatives. Airlines are in trouble, and their woes are not about to go away. Kingfisher has asked Airport Authority to give it time to pay its dues; they already exceed Rs 200 crore. Airlines have run up bills of Rs 1,800 crore with the oil companies that they are not in a hurry to pay. They have been careful to choose government organizations for default. For if they chose caterers or hotels, their passengers would go hungry and their staff would have to sleep on the streets.

But illiquidity does not know when to stop. Soon, airlines will be even more short of cash. They have all bought planes recently and paid, borrowed for them or leased them. Either way, they have to keep paying interest and lease charges, or their creditors will come and take away the planes. That is the way to closure, and bankruptcy. Behind their travails are falling numbers of passengers who are themselves feeling the heat of the recession. The only solution to falling demand is to contract the industry. Kingfisher and Jet tried a planned contraction; if that does not work, there will have to be unplanned closures. In other words, some airlines will fail. Luckily, only three airlines went public. There was so much private money around in the past few years that the rest had no trouble raising money from the rich and from financial institutions. So the exposure of the investing public to the airline industry is limited.

But airlines are not the only industry in trouble. Any industry that has borrowed and has heavy loan service charges faces the prospect of suddenly running out of cash. They will try to renegotiate their loans. But their delinquency will make lenders wary, and fresh credit will dry up. This is not speculation. Banks are already being much tougher with borrowers — including their traditional clients. Some are even refusing the accommodation they had promised. That can be hazardous. For a half-completed enterprise produces nothing and earns nothing. It is dead even before being born. Banks are spawning many stillbirths. Meanwhile, the government will keep pouring money into financial institutions, especially its own; and its spokesmen will keep making upbeat, reassuring statements. It is just as well; there is need for some light entertainment in these dark times. But they have no remedy for the periodic ailment of a capitalist economy. The trade cycle must run its course.