Within a week of Jet and Kingfisher Airline illegal alliance and firing drama, Jet and Kingfisher airlines get government’s help in geting better credit terms for purchase of fuel, more time to pay for their current outstanding with respect to fuel outstanding and also in the ATF prices which will now be revised every fortnight. Now let us look at what is wrong with this picture.
One, if the airlines do not pass on the benefit to the customers then the benefit arising from these concessions will basically go to the airlines. This means that the government is basically contributing to the airline’s profit or helping them reduce its losses. It is taking money from the government owned oil companies and giving it to private airlines, When Vijay Mallya nad Naresh Goyal were asking for all kinds of concessions, I thought the idea was to lower overall prices of air travel so that the number of passengers will go up thus enabling them to increase their load factor. However, this does not seem to be true. How long can the government support airlines in the current economic situation? What about other companies that land up into trouble? I don’t think there would be any end to this.
Now let us put some numbers on the benefit that Jet and Kingfisher airlines will get from these concessions. Kingfisher owes around Rs. 1000 crores for fuel purchases. 30 days additional credits will save him nearly Rs. 8 crores a month or Rs. 96 crores a year. The “King of Good Times” knows how to have a good time on other people’s money.
The above also seems illogical when one considers the following:
(a) ARF prices have come down by 21% in the last two months.
(b) Go Air and Spicejet have announced fare cut. They have removed the Rs. 150 surcharge imposed on each ticket. Air India never imposed it. Jet and Kingfisher still charge this surcharge. SpiceJet has announced 15% cut in fares and is also offering Rs. 99 fare all across its network. SpiceJet and Go Air are also offering better terms in terms of cancellation charges etc. It is surprising that Jet and Kingfisher are asking for all kinds of government help while non of the other airlines are managing their business without making much noise about it.
(c) Mallya’s United Spirits made a profit of Rs. 90 crores in the second quarter. I am sure he can finance his airline without government’s help.
(d) It seems most of the airlines were paying on time. The three major culprits are Jet, Kingfisher and Air India/Indian are the major defaulters. The incentives that the 3 defaulting airlines are receiving is unfair to those airlines who have paid on time. Needless to say, now these airlines are also asking for incentives from the oil companies.
(e) The price of oil is dropping.
(f) Air Arabia has started a new flight – Hyd-Sharjah and AirAsia will fly to Trichy for the first time in India. It seems that most airlines in India are managing their business. The only private airlines crying wolf is Jet and Kingfisher. The reason for these two getting into trouble were their over ambitious and expensive plans to buy other airlines.
Now Kingfisher and Jet have used their influence and high drama to get concessions from the government. They have been given unfair advantage because of their influence and connections. However, both these airlines also owe huge amounts to the Airport Authority of India (AAI). Kingfisher owes Rs. 255 crores and Jet Rs. 36.63 crores. Does Mr. Praful Patel intends to assist his freinds in this matter also.
As I have advocated before, taxes on ATF should be rationalized so that the cost of air travel comes down thus increasing the number of passengers and the load factor for airlines.
I believe that the left’s charge is correct, at least in this case. It has helped Jet and Kingfisher in an unfair manner. People who have managed their business effectively with financial prudence have been punished while those managing their business with much pomp and show with total disregard to the size of their pocket have been rewarded. I hope the media will hence forth not call Vijay Mallya as KING of GOODTIMES.
Hey this gives me an idea. How about coming up with a suitable alternative title for Vijay Mallya to replace “King of Goodtimes.” How about “King of UNAFFORDABLE GOODTIMES.”