A rough flight ahead for Kingfisher's pilot

Sanjay Aggarwal, the new CEO of Kingfisher Airlines, has a turbulent journey ahead. With debts totalling around Rs 7,500 crore and interest payments at 20 per cent of running the company, the airline is under constant threat that vendors – ranging from oil marketing companies to aircraft lessors – will pull the plug. Chairman & Managing Director Vijay Mallya has managed to keep vendors and bankers at bay for the time being, but Aggarwal will need to address serious structural issues to keep the airline flying.
Financial restructuring of a part of the company's debt has been approved. The airline is also understood to be in the final stages of infusing much-needed equity- something that has eluded it for years. According to industry sources, US private equity firm Wilbur Ross may be looking to inject $150 million into Kingfisher in the near future, after it exited rival SpiceJet following Kalanithi Maran taking majority control in the company.
His immediate task is to create a team that will turn around the company in two years. He will also need the promoter's help in cutting costs. Aggarwal is credited with steering SpiceJet into profits in FY10 – for the first time since its inception.
Of course, helping SpiceJet fly out of the red has been increasingly buoyant market conditions. The domestic aviation market is improving rapidly and that could help Kingfisher as well. But running SpiceJet and Kingfisher are two different challenges because of their different business models – the former is a low-cost airline, while the latter a full-service carrier. Moreover, SpiceJet is a smaller airline, compared to the larger, more complex Kingfisher.
Aggarwal's first task is to see that Kingfisher makes money, even as he tries to pay off debts. Amber Dubey, director, aerospace & defence at KPMG, said Aggarwal brought about operational efficiencies at SpiceJet and also built relationships with those running the airline. He helped maximise its yield, too. Spicejet, along with Indigo, is now considered the standard bearer in the low-cost segment.
09/11/10 Praveen Bose & Raghuvir Badrinath/Business Standard

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Categories: Kingfisher Nov 2010