Last fiscal its losses stood at 1027 crores, and its total debts stands at a whooping 6000 crores. The flamboyant owner of the company Vijay Mallaya has asked for government help to stay afloat.
Bad times has hit the king of good times. Kingfisher Airlines has hit turbulence and it needs government help to keep flying, that is the message coming from the Mallaya camp.
The carrier has cut a number of flights to cut costs, and has amassed huge debts that it becoming increasingly hard to pay off. An exodus of pilots has not helped matters.
The airline which was launched by Kingfisher, the beer bigwig, in the go-go years for Indian Airlines has yet to post any profits, five years from its launch.
It has amassed huge debts to oil companies, airport authority of India and to private airport operators like GVK and GMR.
Last fiscal its losses stood at 1027 crores, and its total debts stands at a whooping 6000 crores. The flamboyant owner of the company Vijay Mallaya has asked for government help to stay afloat.
The airline owes huge amounts to oil companies, the Airports Authority of India and private airport operators GVK and GMR Group. The airline has not posted any profit since its launch five years ago, and reported a net loss of Rs.1,027 crore last fiscal and Rs.263 crore in the last quarter.
Mallaya has asked the government to give it time to pay off oil companies, and facilitate lending from banks.
However, BJP is against any government help for the troubled company. Former Finance Minister Yashwant Sinha, opposed the move saying the government can’t bail out a private company. If Mallaya was unable to pay his debts, it was upto him to find ways to get out of the mess, Sinha said.
The bailout, which has become popular in recent years, perhaps due to the major bailouts engineered by US and Europe for their troubled companies at the height of the financial crisis, is an unfair use of public money for private sector entities.
When profits go to the companies themselves, it stands to reason that they should be the one bearing the losses, and the risks.
The question is, does facilitating loans from private banks fall in the same category as a bailout. And will banks be willing to lend to Kingfisher without some sort of government guarantee that it will pick up the tab if Kingfisher fails?
The recent turmoil in the airline started after it reduced 32 flights from its daily schedule, a move which the company said was taken to rationalise route plans and improve yields.
However, this was seen only as another sign of distress by the stock markets.
The company’s stock at the Bombay Stock Exchange (BSE), declined over 19 percent in early trade to a new low of Rs.17.55. It however pared some of the losses and closed the day at 19.65, down 9.45 percent.
Also, the airline saw about 100 pilots quitting recently, but the company’s chief executive said such attrition levels were normal for the aviation business.
“Some 100 pilots have quit over the several months. There is a natural attrition which happens in any airline. UB group has continued to support us, so there is no question about the future or the viability of the airline,” Sanjay Aggarwal, chief executive Kingfisher Airlines, told a news channel.
In the backdrop of a 30 percent increase in jet fuel prices since December 2010, the domestic airlines’ are expected to lose Rs.3,500 crore in the first six months of this fiscal.
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