Oh la la la le ho, wo la la la le leee ooooooooh….!!! Swaha..!! So Vj Mallya is in news again.! But for wrong reasons this time. His Kingfisher Airlines a.k.a KFA is on verge of Bankruptcy. The share has hit life time low on Friday breakin sub Rs 18 level. Huge debts, high fuel costs (ATF) & banks deciding not to lend further to the cash starved KFA is gonna end KFA’s epoch in aviation.
One of my Friend "thala Mani" said me – Lalit, looks like Vijay Mallya has 'embezzled' his profits from KingFisher Airlines into IPL Royal Challengers, on Force One & Formula 1 racing, on UB booze, on luxurious yachts and aircraft, on flashy cars, on flamboyant villas both in India and abroad and on curvaceous girls from KingFisher's calendars.! Ha. No doubt, KFA has the best of best Air Hostess.! And the only thing I would regret abt if KFA closes down is tat.! Right da Thala..!
Debt-laden Kingfisher Airlines on Friday too continued to cut flights just as the country's travel season enters its peak period, catching hundreds of passengers off guard, pushing up spot airfares and putting the spotlight on the loss-making sector.
So why so much of hue and cry abt the aviation sector.
Here are some facts about India's aviation industry:
* The country has six major airlines -- Jet Airways, Kingfisher Airlines, SpiceJet, Indigo Airlines, GoAir and state-run Air India.
* With the exception of Indigo, all the airlines are loss making.
* The three full service carriers -- Jet Airways, Kingfisher and Air India -- have combined debt of more than USD 13 billion (around 65,000 Crores).
* India allows foreign investment in the country's carriers to the tune of 49% but foreign airlines are not allowed to invest in them.
* Kingfisher and Jet have not been successful in tapping foreign investors in recent years. Billionaire Wilbur Ross invested in and subsequently exited budget airline SpiceJet in 2010, making it the only Indian carrier to get major foreign investment recently.
* India's industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers. Aviation Minister Vayalar Ravi also said his ministry was considering such a plan.
* Most mergers in the sector have run into problems as witnessed by Kingfisher's acquisition of the country's first low cost carrier Air Deccan in 2008. The combined entity is yet to post a profit. Stupidity to continue a business, if your not able to earn for 6 yrs now.
* Air India has also not posted a profit since merging with former state-owned partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive.
* Air India and Kingfisher have both undergone a debt restructuring process. Kingfisher cut its debt by issuing shares to 14 banks. But banks are wary of lending to large carriers.
* Indian states heavily tax sales of aviation turbine fuel, the key input for carriers, and ATF prices for domestic operations in India are higher than international benchmarks.
* Indian air traffic was growing at close to 19% in the first eight months of the year, according to government data. Analysts expect the pace of growth to continue.
The economic recession of 2008-09 and its repeat version now were also partly responsible for this. If money does not come into Mallya's kitty, it will become increasingly difficult for him to receive all his flying guests and keep them entertained. Perhaps, he may well have to say bottoms up and the party could be over.
Even Mallya did not expect in his wildest dreams that the valuation of Kingfisher Airlines will drop to just $245 million(around 1000 crores) which is even lower than what he paid to Captain G R Gopinath for Air Deccan and Jet Airways' Naresh Goyal for Subrato Roy's Air Sahara.
Mallya must have realised that airline business is not just high flying but also high funda economics. Good luck to him in 2012!
Fly the Good times Mr Mallya.
Courtesy: Inputs from ET
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