November 14th, 2011
05:32 AM GMT
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(CNN) - The “King of Good Times” is facing some grim times at the moment.

Airline group chief and billionaire business tycoon, Vijay Mallya is struggling to keep India’s Kingfisher Airlines afloat due to surging fuel costs and fuel taxes.

In the past week, the Bangalore-based carrier has cancelled 200 flights in hopes to reduce its debt from Rs. 6,500 crore (about $1.4 billion) to Rs. 3,000 crore ($600 million). Kingfisher has suffered a loss of Rs.1027 crores ($200 million) in the past fiscal year, adding to its mounting debt.

Now the airline is seeking a government bailout while members on the Kingfisher board are meeting to explore ways out of their financial turmoil, including a proposal to sell more than half its property.  Opposition parties in India, including the Bharatiya Janata Party (BJP), strongly oppose a government bailout package to help the cash-strapped airline.

Even the chief of Bajaj Auto, Rahul Bajaj, has spoken out against the bailout for Kingfisher, saying “If Bajaj Auto gets into a mess, would you bail me out?

“If it’s a free market economy, those who die, must die,” Bajaj told reporters at an economic forum in Mumbai.

With the exception of IndiGo, India airline carriers on the whole seems to be taking a hit. Jet Airways reported a loss of $158 million for the quarter ending September. The airline attributed the loss to high fuel and currency devaluation. SpiceJet also reported a Rs 240 crore (approx $48 million) net loss.

The Centre for Asia Pacific Aviation (CAPA) forecasts that the industry needs about $2.5 billion of new cash to maintain operations, including $1.32 billion for the state-owned Air India airlines.

Kingfisher’s plea for government help and the ailing state of India’s ailing aviation industry has raised some questions why the government still has not lifted its ban on foreign airline investment in India. While recent reports suggest that the government has been considering a plan to open up the aviation market, at present foreign institutional investors are allowed to acquire up to 49% in Indian carriers but foreign airlines are banned from investing directly or indirectly in domestic carriers.

Kingfisher has been in favor of lifting the foreign investment ban, while Jet Airways has opposed to it.

According to the Associated Chambers of Commerce and Industry of India, allowing foreign direct investment is key in helping the aviation sector, along with cutting fuel taxes and lowering airport charges.

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Filed under: Air industryAsiaIndia

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soundoff (19 Responses)
  1. Beerbarrel

    The Kingfisher planes are poorly maintained. I have stopped using that airline.

    November 14, 2011 at 7:26 am |
  2. Reg

    Banning foreign investment is a suicidal policy. Adding to that corruption and unduly high taxes/charges from government sides is literally killing off the airlines (and also many other industries). India does not lack technology or indigenous capabilities; it lacks direct financial investment. While other countries are eager for foreign investment, India is banning them, while many foreign parties are eager to invest. This policy literally killed off the TATA-Singapore airlines venture before it even got a chance to operate not too long ago, and still fresh in our memories.

    November 14, 2011 at 8:55 am |
  3. Charley Maso

    So why is this guy still running a Formula One team? Why keep a luxury sport in the middle of a financial carnage, then asking taxpayer money to bail you out ? Doesn't make sense to me.

    November 14, 2011 at 9:15 am |
  4. power4things

    Laissaiz-faire capitalism and "survival of the fit" sounds good, but is directly at odds with a politician's worst nightmare – unemployment. Unemployed people tend to vote you out of office. That's why we have bailouts and subsidy. Merger may be a better answer ...

    November 14, 2011 at 9:18 am |
  5. monty

    This article is an eye opener. Medihas been feeding us the luxurious (fantasy) lifestyle of the sponsors

    November 14, 2011 at 9:23 am |
  6. Sam

    I would say, don't bail out Kingfisher – but I am heavily invested by booking my next three legs offlights on this airline. I am not sure the alternates are that much better either!

    November 14, 2011 at 9:31 am |
  7. zen

    Vijay Mallya is an arrogant womaniser. Govt and/or banks should not bail him out. Tell him to get his money which is outside the country into the company and if he does not do that then the airline should have a natural death. He has already bled the company and if he can sponser the Formula 1 then no bail out should be given to him.

    November 14, 2011 at 9:37 am |
  8. Raj

    I think the gist of this article misses the point. The holding company United Breweries, is 150 year old company, very profitable and the 3rd biggest liquor company in the world. They have several well known brands and in India the flagship beer is KIngfisher. This company and brand are very profitable.

    The much smaller airline group also took on the Kingfisher brand. Now the airline is bleeding so much cash it is having an impact on the bigger alcohol group. The owners want to cut the losses quickly – Vijay Mallaya is one but there are many other major owners. For example Heiniken Group is a 30% plus owner and they are pushing to cut down the airline. So far so good; if left to their own UB would cut Kingfisher drastically.

    The problem is after the Deccan Air merger and KingFisher is the biggest airline in India and serves as a public utility so when threats came that they were going to shut down flights to many small cities that have specifically upgraded airports at the cost of rail stations (like mine); the city and state politicians are pushing back on the Airline.

    It is under this context that the airline is asking for the government to take a stake – if its a utility thats loss making then the government should chip in if they prevent a company from cancelling routes. OR the other answer is to allow foreign investment so international airlines can use Kingfisher as an excellent feeder system. Jet on the otherhand has the biggest international network so thats why they are trying to block FDI. They already benefit from an international system.

    The point is this article really mistates the facts as if Mr. Mallaya is going out to get a handout. He's not – they are just trying to get rid of their assetts but several parties are blocking this – thus the request for government funding.

    November 14, 2011 at 12:51 pm |
  9. Subba Iyer Mani

    The answer lies in the last paragraph of the article. Not only the aviation sector but the whole Indian economy centres around the world crude oil prices considering that most of the fuel is imported. The aviation sector in India has to be sustained and FDI is to be allowed in aviation sectora. Let us try to open up the aviation sector in India.

    November 14, 2011 at 12:52 pm |
  10. Truth

    the name sounds like canned-food

    November 14, 2011 at 2:25 pm |
  11. Ram v

    King fisher" There was no knigsly look when i travelled.The customer service sucks.when i travelled last time the plane was stopped on the tarmac for an hour because they forgott to take gatepass of mine.Inside the plane the flight attendents were rude.At that time i thought about Mr Vijay Malya and knew why he could not pull a win a championship in cricket league.

    November 14, 2011 at 3:33 pm |
  12. Bharat

    Indian Taxpayers money is more badly needed by the under previlaged.
    All bussiness houses that make profit more than the target, never come forward to deposit in the Government treasury.
    Kingfisher should have known, an airline cannot be run just by publishing a Sizzling bikini clad Annual calander.

    November 14, 2011 at 6:00 pm |
  13. Mumbai Torontonian...

    Does anyone proof-read these articles –
    "India airline carriers on the whole seems to be taking a hit."

    "while Jet Airways has opposed to it."

    November 15, 2011 at 1:27 am |
  14. jignesh

    bail out.
    no question on that.
    then others will follow the same route

    November 15, 2011 at 4:18 am |
  15. Indian dude

    Well CNN! There are 200+ airports in this country; but you chose an airport with a view of a ghetto. How about showing this nation once without cow/snake or for that matter a ghetto.

    November 15, 2011 at 10:03 am |
  16. Bobby

    This is a well written article. This issue is a good business case – Indian aviation companies should learn from US aviation strategies on how to make get out of debt. US air companies have turned their balance sheets around and learned from their mistakes.

    November 15, 2011 at 11:30 pm |
  17. J

    You got it right Mr. Bajaj...“If it’s a free market economy, those who die, must die,”

    February 23, 2012 at 4:01 pm |
  18. Elangovan

    I am ready to resolve Kingfisher airlines Issue

    March 7, 2012 at 2:44 pm |
  19. arvinddabas

    Simply the company was not economical solid. The problem was internal and not external

    Website Designing Company in Delhi

    March 6, 2014 at 8:03 am |

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