Tuesday, March 15, 2016

Lessons not learnt from Kingfisher mess: At Rs 51,000 cr, Air India has highest debt in sector

New Delhi: Vijay Mallya is the target of all-round ridicule for taking large loans from banks to run Kingfisher Airlines, defaulting on these loans and then cocking a snook at feeble recovery attempts by banks and government agencies. Kingfisher’s demise in 2012 and the debt pile-up was a result of the gross mismanagement by Mallya and his cronies in the airline, but other Indian airlines which survived the cost mayhem do not seem to have learnt many lessons. One look at the financials of India’s aviation industry makes it is clear that airlines’ cost strategies are still risky though their managements are more robust.
Airlines’ bottomlines have begun improving for the past few quarters but solely due to falling jet fuel prices – their costs remain as high as ever – and any significant uptrend in fuel prices over the next few months could bring India’s airlines back on their knees. Also, Kingfisher certainly overleveraged itself without adequate assets but the existing airlines are not really blessed with ideal debt:equity ratio either.
Take the case of state owned Air India, which accounts for the largest share of Indian airlines’ total debt pile. According to the latest data made available in Parliament, the airline was sitting on borrowings of over Rs 51,000 crore till March 31 last year. That is more than five times the debt that KFA has on its books at about Rs 9,000 crore. MoS Aviation Mahesh Sharma said in Parliament earlier this month that Air India has a total debt burden of Rs 51, 367.07 crore and this includes Rs 22,574.09 crore outstanding on account of aircraft loans.
14/03/16 Sindhu Bhattacharya/First Post
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