New Delhi: The trigger — to the raging debate over one of India’s leading private carriers — went off on the night of February 17 when word spread like wildfire that something was amiss at Kingfisher’s Kolkata station. As it turned out, the airline’s staff had gone on a flash strike, protesting against non-payment of salaries.
Earlier that week, the income tax department had frozen the airline’s bank accounts for non-payment of tax deduction at source (TDS). By the evening of February 18, the problem had become serious enough for the airline to issue a statement. But it was too late.
A massive disruption of flight operations had begun. The airline staff had even stopped making direct bookings for metro destinations such as Kolkata and Hyderabad.
But what led to the latest edition of the trouble that has plagued Kingfisher? After all, just three months ago, Kingfisher flyers had witnessed similar disruptions. A look at the statistics reveals why. Kingfisher has notched up a debt of over Rs7,000 crore. Just recently, the airline reported a loss of `444 crore for the third quarter of the current financial year.
The airline was already struggling to make payments for the salaries of its employees, for aviation turbine fuel due to which state-owned oil firms were growing restive, and to various other government agencies.
The dues were mounting and Kingfisher was again hoping for a further bailout from the banks. A consortium of banks led by the largest public-sector State Bank of India (SBI)-that owned about 23 percent of the airline-already had substantial exposure.
But how did things come to such a pass for Kingfisher, that always had the image of a premium airline where the hospitality was king-size.
“Kingfisher got their strategy wrong. It targeted the upper-end of the market. In India, the public is not ready to pay for frills. They want a clean aircraft, air-safety, on-time performance and point-to-point connectivity. Kingfisher lost out since it thought it could capture the market by offering frills,” a prominent aviation analyst told this newspaper on condition of anonymity.
Most believe that Kingfisher’s troubles actually began a few years ago when it acquired low-cost carrier Air Deccan. The acquisition quickly turned into a nightmare when the recession of 2008 hit hard. Global oil prices started shooting up.
“For Kingfisher, it was a mish-mash of business models. Their’s was a flamboyance-based aviation model. Then they acquired a low-cost carrier like Air Deccan but did not leverage it,” the analyst added.
26/02/12 Sridhar Kumaraswami/Deccan Chronicle
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