are good times here again?

8/14/2019 Are Good Times Here Again?

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Are Good Times Here Again?Low ATF prices and a possible shift in FDI policy for aviation hold out prospectsof a speedier turnaround for Kingfisher Airlines. K.R. BALASUBRAMANYAM

GO IN G IN T O T H E T H IR D

quarter of 2008-09, VijayMallya’s Kingfisher was the

most troubled airline in India (referour cover story Saving Kingfisher , BT , December 14, 2008). The car-rier had accumulated losses of Rs2,500 crore thanks largely to anunprecedented surge in Air TurbineFuel (ATF) prices over the previous

six months. Kingfisher’s projectedlosses for 2008-09 at Rs 1,500crore was more than twice the es-timated total profits (Rs 600 crore)of UB Group companies! But a slewof recent pricing developments andpolicy murmurs suggest that theworst may be over for the airline

and its turnaround may happensooner than expected (see Mallyainterview “We can wipe out our

losses in three years”, in the sameDecember cover story).

With crude coolingoff over the last twomonths, low ATF priceshave he lped br ingdown Kingfisher’s fuel

bill (the exact figurewill be known when KF

announces its thirdquarter results). Ina recent presen-tation, Kingfishersaid it expectedcrude to settle

Vijay Mallya:“I think the worst is over”

B H A S K A R P A U L



at around $70-90 a barrel over thenext 6-12 months (from $38 abarrel currently). In addition, meas-

ures like route rationalisation—theairline cut services to several desti-nations over the past two months—and putting on hold expansionplans, including deferring delivery of some 80 aircraft, have helped rein inexpenditure. Mallya told BT afterKF’s annual general meeting inBangalore on December 26 that heexpected the airline to break-evenoperationally in December withrevenues of Rs 500 crore from pas-senger, cargo and ancillary services.

“I think the worst is over andthere’s no reason why private equityinvestors, who had expressed in-terest when oil was at $100 a barrel,shouldn’t be more interested whenoil is $36 a barrel,” said Mallya,who has been scouting for $400million (Rs 1,950 crore) capital forhis airline over the past six months.

His talks with PE firms have beenstuck over issues of valuation.

But Mallya may now get whathe has always wanted—an over-seas airline as a partner—as there isnews that the government may al-low foreign carriers to pick up eq-uity in their Indian counterparts.Mallya would prefer a strategicpartner, for he believes that it willnot just offer a better valuation,

but would add value to KF’s ownop eration al efficiency. BritishAirways, Singapore Airlines and

Virgin etc., could be possiblesuitors, but Mallya, in an e-mailresponse to a BT query, offered nomore than “there is no point indiscussing someth ing tha t i scurrently not permitted”.

That Mallya is in high spiritsagain is evident from Kingfisher’sp l ans t o s t a r t s e rv i ce s f romMumbai to London Heathrow,Singapore and Hong Kong as wellas a flight between Bangalore andColombo over the next 6-8 weeks.He has also followed other air-lines in cutting fares and offeringsops to boost sales. Clearly, he isfeeling buoyed by the expectedgood results for the Decemberquarter. But as industry expertssay, Mallya’s challenge lies in ext-ending that performance to thelast quarter of 2008-09.

are good times here again?

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