Stake sale may just be the only hope for Kingfisher Airlines to see better days soon. Will the government allow the change in provision? And how soon?
Only the shoe owner knows where the shoe pinches – rather crude
in form and fashion, yet effective and totally apt to explain what airline operators are undergoing in India. And for all these months when we were talking about Mallya being the lucky one who’s shown no wrinkled worry on his face, when all that Kinghfisher was doing was acquiring and buying stakes one after the other, when all that Mallya was busy with cricket and Jet Airways, we arrive at a time when we see the flamboyant ‘Bling of good times’ proving that times indeed weren’t so good!
After sailing through turbulent times for over three years, the flamboyant Vijay Mallya seems desperate for a bailout. And what more, his recent request for the government to allow foreign equity levels upto 25% in domestic aviators, confirms that United Brewery’s cash reserves are finally proving insufficient to support his bleeding aviation business. When 4Ps B&M asked Mallya about the chances that such an amendment might happen, he simply stated that it was upto the government to decide that. “I have been approached by a number of players including British Airways, Singapore Airlines and Virgin Atlantic for a 25% stake purchase in Kingfisher Airlines, but it is entirely the government’s call to let it happen. One should really ask this question to the government,” stated a loud Mallya.
In the light of quarterly losses rising deplorably by 90% to touch Rs.483.2 crore (for Q2, 2008-09), oil bills worth Rs.1,000 crore still due, and over Rs.200 crore still to be paid to the Airports Authority of India, Kingfisher has clearly fallen into some financial pit at the moment. What’s worse, with less that 2% Indians using the air mode today and with fares set to rise again, Kingfisher is witnessing its worst days with company stock prices tumbling at the BSE. Lack of credibility is not where the market doubts Mallya, it’s just that Kingfisher Airlines appears too weak at the moment to stand firm despite the earth moving under its ground. Even ICICI Bank has rejected Kingfisher’s second loan requisition. November 17, 2008 saw Kingfisher fire 50 more co-pilots! Really, it’s time for us to mull over our previous belief that Kingfisher Airlines is uniquely insulated from the current bloodbath in the aviation industry. What’s worse, losses on the international routes have also forced the airline to close down its US office, even before it could commence operations. Speculations are also rife that the airline might be also forced to close down its offices in Hong Kong, Singapore and London too!
Kingfisher has already leased-out three of its five A340-500s aircrafts and two more are likely to be sent back or leased out to cut down its operating costs. And the airline has already been accused of payment defaults by GE aviation. And the bailout? Well, Harshvardhan, Chairman, Starair while explaining why this sort of policy is ‘unwelcome’ explains to 4Ps B&M, “Funding and technical skills are two things that foreign players bring with them. We have enough technical skill and just need funding and for that 49% investments by FIIs are already allowed. Beyond this it will be a threat to national security...” O.K.! Point noted, Sir!
So here is our message to Dear Dr. Mallya: Sir, we understand your predicament, but national security comes first :-) [Well, atleast that’s a good excuse for the Ministry ;-)]
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Only the shoe owner knows where the shoe pinches – rather crude
in form and fashion, yet effective and totally apt to explain what airline operators are undergoing in India. And for all these months when we were talking about Mallya being the lucky one who’s shown no wrinkled worry on his face, when all that Kinghfisher was doing was acquiring and buying stakes one after the other, when all that Mallya was busy with cricket and Jet Airways, we arrive at a time when we see the flamboyant ‘Bling of good times’ proving that times indeed weren’t so good!After sailing through turbulent times for over three years, the flamboyant Vijay Mallya seems desperate for a bailout. And what more, his recent request for the government to allow foreign equity levels upto 25% in domestic aviators, confirms that United Brewery’s cash reserves are finally proving insufficient to support his bleeding aviation business. When 4Ps B&M asked Mallya about the chances that such an amendment might happen, he simply stated that it was upto the government to decide that. “I have been approached by a number of players including British Airways, Singapore Airlines and Virgin Atlantic for a 25% stake purchase in Kingfisher Airlines, but it is entirely the government’s call to let it happen. One should really ask this question to the government,” stated a loud Mallya.
In the light of quarterly losses rising deplorably by 90% to touch Rs.483.2 crore (for Q2, 2008-09), oil bills worth Rs.1,000 crore still due, and over Rs.200 crore still to be paid to the Airports Authority of India, Kingfisher has clearly fallen into some financial pit at the moment. What’s worse, with less that 2% Indians using the air mode today and with fares set to rise again, Kingfisher is witnessing its worst days with company stock prices tumbling at the BSE. Lack of credibility is not where the market doubts Mallya, it’s just that Kingfisher Airlines appears too weak at the moment to stand firm despite the earth moving under its ground. Even ICICI Bank has rejected Kingfisher’s second loan requisition. November 17, 2008 saw Kingfisher fire 50 more co-pilots! Really, it’s time for us to mull over our previous belief that Kingfisher Airlines is uniquely insulated from the current bloodbath in the aviation industry. What’s worse, losses on the international routes have also forced the airline to close down its US office, even before it could commence operations. Speculations are also rife that the airline might be also forced to close down its offices in Hong Kong, Singapore and London too!
Kingfisher has already leased-out three of its five A340-500s aircrafts and two more are likely to be sent back or leased out to cut down its operating costs. And the airline has already been accused of payment defaults by GE aviation. And the bailout? Well, Harshvardhan, Chairman, Starair while explaining why this sort of policy is ‘unwelcome’ explains to 4Ps B&M, “Funding and technical skills are two things that foreign players bring with them. We have enough technical skill and just need funding and for that 49% investments by FIIs are already allowed. Beyond this it will be a threat to national security...” O.K.! Point noted, Sir!
So here is our message to Dear Dr. Mallya: Sir, we understand your predicament, but national security comes first :-) [Well, atleast that’s a good excuse for the Ministry ;-)]
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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