Officially grounded. The government has announced withdrawal of international bilateral traffic rights, domestic slots of Kingfisher Airlines with immediate effect according to the aviation ministry.
While the airline’s slow death makes global headlines, it appears its flamboyant owner couldn’t care less. There has been no word from Vijay Mallya on the future of what was once India’s second largest air carrier.
Evidently liquor baron Vijay Mallya’s airline has had no takers despite the entire buzz around finding investors to save it. Mallya himself has kept away from it like plague as the airline has dented his brand significantly. Many had anticipated a string of global big birds to come for easy and cheap prey and get an entry into the Indian aviation space. That didn’t happen and ironically things have to come to a situation that no one wants to resuscitate the carrier.
Mallya is also faced with a criminal case for failing to remit to the income-tax authorities TDS (tax deducted at source) on employees’ salaries. The cash-strapped airline hasn’t paid its entire staff for over eight months though PTI reported recently that some employees did get salaries.
The airline has never posted a profit in its eight years of operations and has lost over Rs 3,000 crore in the last year alone. The airline’s latest financial results posted a loss of Rs 755 crore for the third quarter ended 31st December 2012, even though it did not operate flights during this period.
Kingfisher Airlines flew to eight countries including Bangladesh, Hong Kong, Nepal, Singapore, Sri Lanka, Thailand, Dubai in the United Arab Emirates and the UK. These traffic rights were allocated to the firm between 2008 and 2011.
“Whatever assets it has will likely be carved up and any leased jets will be returned to lessors and the airline will cease to look like an airline. It has already been grounded and lost its operating license – there really isn’t a fat lot left of it to even call it an airline,” says Saj Ahmed of London based Strategic Aero Research.
“It’s cheaper to start a new airline than restart KFA,” says Kapil Kaul, CEO of Centre for Asia Pacific Aviation. The aviation industry has long wanted to see Mallya spend his own money towards recapitalising the airline. “He could have stepped in earlier with his own money, rather than wait for a third party to invest which to date has still failed to materialise,” says Ahmed. According to experts $600 million or more would be required to put KFA back into the air, but now with a complete withdrawal of slots, it’s clear that even regulatory authorities don’t believe in reviving the carrier or taking responsibility of its disintegration.
“There is no sale happening,” says a banker who has worked on potential deals for the now defunct airline. Having taken many foreign carrier reps to the ministry, he asserts, “Even the aviation ministry is not urging investors to take up the KFA case.”
So why aren’t investors coming in? For many reasons. One, it ‘s not an operating airline and buyers have the option of better-run SpiceJet, Go or even Jet Airways that are wiling to sell stake. Two, the massive debt of Rs 15000 crore is hanging like a Damocles’ sword. Employee morale is low, many human resource linked issues are stuck in court cases and the pilot base too has shrunk. And importantly, Vijay Mallya himself doesn’t care.
In recent trouble, state-run Airports Authority of India (AAI) said it will not go by the “empty promises” of the airline management and insisted on being paid up for its dues. At this rate if the planes keep standing at airports, the quality of aircraft will come under question. “I just find it difficult to see a situation where that airline can ever fly again,” says Ahmed.
Kingfisher has remained grounded since October 1 and its flying licence expired on December 31.
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