Kingfisher Airline: Problems for King of Good Times

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 Indias 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 proposalto 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 its 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 alsoreported 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. Kingfishers plea for government help and the ailing state of Indias 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 presentforeign 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.