Time to ask Ajit Singh some tough questions
Given that aviation minister Ajit Singh has finally decided to put his foot down and said Kingfisher Airlines will not be allowed to fly unless its aircraft are certified fit by its engineers, and Vijay Mallya doesn’t seem to be in any hurry to bring in funds from other businesses to pay staff arrears for over six months, it’s obvious Kingfisher is on the proverbial wing and a prayer. Indeed, given how the airline has just 7 planes left—it needs a minimum of 5 to retain its licence—he could even be running out of wings pretty soon.
That’s bad news for the banks who’ve lent him around R8,000 crore and are already reeling under the impact of loans turning bad (see FE’s lead story as well as top edit today), so the banks need to continue to ask Mallya some very tough questions, including calling in corporate guarantees group companies have given—if anything, banks have been very lenient with Mallya, including converting R750 crore of loans at a price of R64 even though the airline’s share price was just R40 at that time! While banks have to be asked tough questions, even tougher questions have to be asked of Ajit Singh. Kingfisher has been floundering for a long time—at the beginning of the year, it was down to around 16 or so planes of its 64-aircraft fleet and at that time a Directorate General of Civil Aviation (DGCA) report had said the airline was cannibalising parts, removing them from one aircraft to use in another. While the airline was given repeated chances to come up with a credible revival plan, the then head of the DGCA threatened to close the airline down on safety grounds—his argument was that a financially compromised airline would almost certainly be compromising on safety. The then DGCA, however, was removed and the immediate threat over Kingfisher subsided. With Ajit Singh now acting tough with Kingfisher, is he acting out of concern for staffers who haven’t got their salary or does he now believe there’s a safety issue? If it’s the latter, it’ll be interesting to know what suddenly went wrong. Trying to save R8,000 crore worth of bank loans is a laudable task but the civil aviation minister’s first duty is towards passengers.