Blaming Mallya for the problems at Kingfisher is extremely harsh

Written by: Sunil Fernandes

Blaming Mallya for the problems at Kingfisher is harsh
The airline industry has always been a flamboyant industry, which attracted the likes of Damanias (Damania Airways), Khemkas (Skyline NEPC), Modis Modiluft, East West Airlines, Raj Air, Air Sahara and scores of other airlines to set up business. All of these and myriad others (at least 10 more) are now defunct, merged or simply sold off.

In the 1990s, as budding journalists we were forced to cover the flamboyant airlines industry, as nobody was interested in reading on brick and mortar companies. We would hanker for a one-on-one with Pervez Damania (Damania Airways) or Ravi Prakash Khemka (Skyline NEPC).

The airlines industry than had panache, with virtually every top industrialist vying to set up a presence in the space.

In the last 20 years, almost all of the airlines have shut shop or merged, leaving just Jet Airways from the yesteryears to survive. Jet has survived alright but has got a mountain of debt on its balance sheet and has also teteered and faltered especially over the last few years. It has a staggering debt of Rs 14,000 crore on its books and the loss for the quarter ending September 2011 was a huge Rs 740 crores.

Jet received a warning recently from the Central Board of Excise and Customs to clear its outstanding dues of about Rs 69 crore, or face  accounts being freezed. Spicejet another existing player reported a loss of Rs 240 crores for the quarter ended September 2011 and again remains unprofitable. Enough and more has already been written about Kingfisher Airlines and Air India.

The only one that is supposedly making a profit is Indigo and kudos to the airlines efforts to do so.

The Centre for Asia Pacific Aviation (CAPA) has said that airlines in India are likely to post a loss of $2.5-$3 billion for 2011-2012, with state-run Air India alone likely to account for more than half of it. While government sympathy remains, its apathy to the industry is shocking.  "We will not bailout private airlines," has now become cliche. Never mind if billions of rupees are spent in keeping the inefficient and loss making Air India running.

The problems

The airlines industry has perpetually been an unenterprising endeavour. Aviation Turbine Fuel remains the highest in India, when compared to the world and so are taxes.

The government's policies for the industry are not too favourable. Adding to the woes are problems like rising crude prices and a depreciation in the rupee, which accentuates problems even further.

Competition from the Railways ensures that pricing flexibility remains limited. And, when the airlines decide to hike fares, the government intervenes like Praful Patel the former aviation minister did a few months back. Most of the sectors remain unprofitable and the load factor woeful.

Clearly, the airlines business is not the best business to be in. Blaming Mallya for all the problems at Kingfisher is being extremely harsh, if past precedent of scores of defunct companies is anything to go by. Perhaps, the only draw for being in the business was its flamboyance of the past, which of course has lost shine today. Resurrecting the industry from the brink would have to come from the government and Mallya may simply not be able to do enough.

Read more about: kingfisher, jet airways, spicejet
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