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Why Gulf carriers could help get the monkey off Mallya's back?

Written by: Sunil Fernandes
Updated: Monday, July 9, 2012, 10:52 [IST]

Why Gulf carriers could help get the monkey off Mallya's bac

When Damania Airways, Modiluft and Air Sahara ran into trouble, they did not have difficulty finding a white knight in shining armour. Business conditions then were better, aviation turbine fuel was cheaper and the business was suave.

The scenario has changed dramatically over the years. Global carriers particularly in Europe are cash strapped, debt ridden and are making losses. British Airways has seen quarterly losses increase four fold, while Europe's largest carrier Lufthansa too has reported losses.

There's very little interest in the aviation business globally and merger and acquisitions are just not happening due to the tepid economic environment. There's very little chance that a Western carrier would pick a stake in Kingfisher Airlines under such precarious business conditions.

Kingfisher Airlines acquisition makes sense for Etihad and Qatar Airways

Etihad Airways (national carrier of UAE) can cater to a slice of the 1.5 million Indian expatriates living in the Emirates who fly to India. The airline does not fly to smaller destinations in India like Pune, Nagpur, Chandigarh which many Indian expatriates working in UAE would like to fly to. So, buying out Kingfisher Airlines would enable it to easily offer connecting facilities to smaller destinations within India through stake in a domestic carrier.

Secondly, Etihad Airways is owned by the cash rich government of UAE and in the past has made its global ambitions well known. In fact, the airline recently picked stake in Virgin Australia and also Irish carrier Aer Lingus. Etihad Airways has also entered into a deal with Manchester City for a 400 million-pound sponsorship deal - clearly no dearth of money.

Qatar Airways, again owned by the state has similar global ambitions. The airline is one of the fastest growing airlines in the world and in a short time is flying to over 100 destinations across the globe. It again can to the need of half a million Indian people living in the state of Qatar and who might want to fly to smaller cities and towns in India.

Interestingly, the state of Qatar has one of the highest per capita incomes in the world. The airline recently picked a major stake in the Luxembourg cargo airline Cargolux

It makes business sense for Gulf carriers to pick a stake or completely buy out Kingfisher Airlines. It would also help further their ambitions in a fast growing market like India, while ensuring a rapid global expansion of their operations. While clearly there are opportunities for these carriers, whether they would like to take the monkey of Mallya's back, is another matter that only time can tell.

GoodReturns.in

Story first published:  Monday, July 9, 2012, 8:35 [IST]
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