Why should Kingfisher airlines be saved?

A few days back, the newspaper read that the Kingfisher Airlines may be rescued by Government of India. First, Corporate Affairs Minister,  Veerapa Moily and then Minister for Aviation, Ajith Singh  joined the Chorus . In Indian aviation industry  , there is one white elephant  , Air India, with accumulated losses and debt of about Rs 67000 crores.  Kingfisher airlines , simply put owes about Rs 7000 crores to its lenders. According to the planning commission , the Aviation industry will be under debt of $ 20 Billion in 2011-2012. The Major factors being “many taxes” like those on fuel, aircraft leases, airport charges, air passenger tickets, air navigation service charges, maintenance costs, fuel throughput fees and other such charges.  The major Culprit is ATF and the sales  taxes imposed by the states,which vary from 16-30 %. Below is the data ,from Centre for Asia Pacific Aviation , which make the fate of the Indian aviation industry even murkier. Lately there has been debate in the print media. A comparison of Kingfisher and Satyam.  And the conclusions have been logical ,saying they are two different episodes. And this shall also set a wrong precedent for future. And let the market force drive the industry. In US, recently , American Airlines , filed for chapter 11. I wish my father may also be minister for aviation and I may also take national carrier for ride. Mr. Kejriwal , stop asking questions about politicians flying around for elections  campaigning /propaganda ( chunava prachar). Is someone naive ,here? An important question remains unanswered is, why kingfisher airlines be saved?  Purely because Vijay Mallya , is King of good times and promises to share a bit of goodness with politicians . Are there any lessons to be learned by South West airlines , at all. Or hot air balloon is a promising and enthralling option. Pranab sir, more sleepless nights are waiting ahead for you. Recently ,interesting article was penned by Swaminathan S A Aiyar  http://bit.ly/zuwtIf

ATF price in the four metros *Per Kilolitre

New Delhi
17 November 2011 Rs 62,310.33
16 November 2010 Rs 44,603

17 November 2011 Rs 70,465.19
16 November 2010 Rs 51,802

17 November 2011 Rs 63,228.40
16 November 2010 Rs 44,716

17 November 2011 Rs 67,018.04
16 November 2010 Rs 47,812

A billion-dollar horror story

$6 billion
Was the loss for the Indian carriers as on March 31st 2011.

$2.5 billion
Are the current fiscal losses (FY 11-12). This includes losses of about $ 1.75 to $2 billion for ai. For the rest of the carriers, the amount stands at $600-$700 million. Exception is Indigo which is expected to be profitable but operational profits will take a large hit in this fiscal. However, Indigo continues to deliver a robust performance in extremely challenging circumstances.

$2.5 billion
Is the amount Indian carriers need immediately. This includes ai requirement of $1.32 billion.

$6 billion
Indian banks have exposure of about $6 billion only related to working capital and term loans. They will have additional exposure on the aircraft related financing

$16 billion
Is the total debt burden of Indian carriers. This is an approximaate account. Largely on the balance sheet of three major carriers (Jet/Air India and Kingfisher Airline). This includes vendor related debt of $2 billion (approx)

$1 billion
Is the fund requirements of three listed airlines. Their current market cap is about $850 million.

Source: Centre for Asia Pacific Aviation


6 responses to “Why should Kingfisher airlines be saved?

  1. If one looks at this problem from the perspective that it is the government’s own policies that have largely contributed to destroying KFA, and bringing Jet and Spicejet close to shutting down (forgetting for a moment all the other airlines that have died a quiet death like Modiluft, Paramount, East West, etc, etc), it does not seem to be a very bad option – this bailing out of KFA, to save thousands of jobs and to safeguard a major component of infrastructure that is critical for India’s growth.

    Unfortunately, the government that has been seeing the nation only through socialist myopia for over 60 years, considers this industry as useful only to the ‘rich’ and hence a cow that needs to be endlessly milked, while thousands of crores of subsidy is poured into the railways because they are used by the poor. If we do not urgently recognize that airlines, airports and cargo terminals are all basic and critical infrastructure, and vehicles of growth of the nation, then we are doomed to fail as a nation.

    Consider this. In a flight from say Bangalore to Mumbai having about 150 passengers, how many rich people (who paid for their own tickets, and prefer to fly rather than use the train) do you think will be on that flight? My guess would be fewer than 10%. The rest are professionals and business travellers spending company money to complete some work related tasks. Thus, by taxing them and bleeding them dry, the government is taxing and bleeding business by making them spend more and ultimately making then a little more uncompetitive.

    Thus, the government must release this industry from its shackles by being very reasonable in their levies and also exit from the ownership of AI and leave business to the Mallya’s and the Goyals of the world. It should only be responsible for ensuring a fair and a level playing field.

  2. Pingback: Kingfisher, AI seek nod for jet fuel (ATF) import « The Airport Informer

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