Jitendra Bhargava, former ED of Air India said it is a beneficial decision taken by DGCA. According to him, this will help owner Vijay Mallya to arrange for some money and ensure that his employees are paid. However, it is up to the government now to decide whether the licence will be kept under suspension or will be cancelled altogether.
Bhargava further added that Kingfisher has already accumulated a lot of debt and it can no longer borrow money from banks. Therefore, the situation is not at all rosy for the company at the moment.
Here is the edited transcript of the interview on CNBC-TV18.
Q1: Your initial take with regards to the developments on Kingfisher?
A:I have maintained that it is a very beneficial decision taken by DGCA for Kingfisher. Perhaps, Vijay Mallya was not being able to take a call on suspending operations. Government has in a way facilitated that. Now Mallya can go ahead and look for ensuring that he can get adequate resources to put the airline back, in case it is feasible. Alternately, the government will have to take a call on whether to keep the licence under suspension or cancel it altogether.
He can take his time get the money, ensure that the employees get paid, all the other vendors get paid and perhaps start on a clean slate. That to me looks inevitable; it looks an impossible thing at the moment because the debt on its balance sheet is too huge. Banks are unlikely to lend anymore money; I don't think he will be able to get enough money from his own resources to put in. Overall, it doesn't sound a very rosy picture for Kingfisher.
Q: I wanted to get in a point which an aviation expert was talking about earlier, that the minimum amount which would possibly be needed in order to start operations would possibly be five operational planes etc. Considering that they do not have any sort of working capital, even if they do get to that point in terms of starting operations on a minimal basis, how sustainable do you think that would be?
A: I don't think there is any chance of a sustainable venture under the banner Kingfisher. Business model of Kingfisher has been flawed. Five aircraft stipulation is a government stipulation for any airline to have a licence and that is a different thing. We are talking in terms of money.
How will he garner enough resources to pay the existing vendors, ensure that the companies from whom he has taken the aircraft on lease are paid? He is regarded by the industry as a serious player and not something that he can start operations and again forced to be suspending operations. DGCA in my opinion has a crucial role to play.
If Vijay Mallya can submit a proposition which is sustainable, which shows that he has a steady flow of money coming in and only then should this suspension be revoked. Otherwise, there are hard tines for Kingfisher.
Q: What according to you is the way forward now? What do you think will be the next step that we could see possibly from the DGCA and may be even from the lenders at this point in time? Do you think that liquidation of assets, whatever is remaining on Kingfisher's books etc would now come to a point where there would be liquidation of assets?
A: If you look at it, in the last 6-8 months Mallya has tried his best. Now there is a sense that a lot of crony capitalism goes on and as a result of it no hard decisions were taken 6-8 months ago. In my opinion, the most logical course would have been for Vijay Mallya to have suspended his operations 7-8 months ago. He wouldn't have sustained so many losses. He has only added up to the losses in the last 7-8 months without giving any promise to the industry that he can ensure Kingfisher's survival.
As far as DGCA is concerned, I do not know whether DGCA has stipulated in today's order that Vijay Mallya is given four weeks time to submit his proposal which will be reviewed by DGCA. In case it is an open ended kind of a thing, it is again a wrong thing for the DGCA to have done because you cannot be playing with the market for too long in this scenario.
We have noticed that the existing carriers have dropped their capacity by 19% in the winter schedule vis-à-vis the winter schedule of last year. What impact will it have on the fares for the traveling public? This is something that the government needs to answer, DGCA needs to answer, they cannot be mute spectators to what is happening in the industry and in the market.
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