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Can Kingfisher fly? PDF Print E-mail
Tuesday, 21 February 2012 00:00
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A scheduled airline can’t cancel flights at will

With the ailing Kingfisher cancelling flights almost at will—reportedly, just around 16 of its 64 aircraft are operating at present—the DGCA is understandably upset and has summoned its CEO Sanjay Aggarwal to explain what the airline’s plans are. While Aggarwal will undoubtedly try and put forth a plan of action, including one to get more pilots to replace those that have walked off, there’s really very little in his hands. Eventually, all the cards remain with PSU banks, largely, and depend on whether they are willing to take another haircut. Last year, apart from lowering interest rates on outstanding loans, PSU banks converted R750 crore of Kingfisher debt at a price of R64 per share even though the prevailing price was R40 at that time—today it’s down to R26—and it didn’t look like the airline had any sound strategy to fly back into the black even then. Banks have said they are willing to look at restructuring debt, provided Vijay Mallya comes up with some serious money, apart from a turnaround plan, and the matter rests there.

While banks, and Mallya, have to decide on whether a full-service carrier works in a market that is increasingly budget, there are other issues that need to be addressed, and not just for Kingfisher—does the airline industry need to target the rail traveller if the fares are below-cost? Like telcos, airlines too lowered their fare to uneconomic levels—telcos, meanwhile, have raised tariffs a bit. Two, if Air India keeps getting bailouts, and uses this guarantee to keep lowering fares, how is the industry to survive?—if Air India is allowed to go belly-up, this will raise fares all around. On a related note, if Air India deserves a bailout, why doesn’t Kingfisher? Third, and this has been addressed, why should Air India get all the lucrative foreign destinations? Perhaps DGCA needs to call in bankers and the aviation/finance secretaries in its meeting with Sanjay Aggarwal.

 

 

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