Current II-January 25.
qxd 1/3/2009 4:52 PM Page 3
bt current
Are Good Times Here Again?
Low ATF prices and a possible shift in FDI policy for aviation hold out prospects
of a speedier turnaround for Kingfisher Airlines. K.R. BALASUBRAMANYAM
G
OING INTO THE THIRD
quarter of 2008-09, Vijay
Mallya’s Kingfisher was the
most troubled airline in India (refer
our cover story Saving Kingfisher,
BT, December 14, 2008). The car-
rier had accumulated losses of Rs
2,500 crore thanks largely to an
unprecedented surge in Air Turbine
Fuel (ATF) prices over the previous
six months. Kingfisher’s projected
losses for 2008-09 at Rs 1,500
crore was more than twice the es-
timated total profits (Rs 600 crore)
of UB Group companies! But a slew
of recent pricing developments and
policy murmurs suggest that the
worst may be over for the airline
and its turnaround may happen
sooner than expected (see Mallya
interview “We can wipe out our
losses in three years”, in the same
December cover story).
With crude cooling
off over the last two
months, low ATF prices
have helped bring
down Kingfisher’s fuel
bill (the exact figure
will be known when KF
announces its third
quarter results). In
a recent presen-
tation, Kingfisher
said it expected
crude to settle
at around $70-90 a barrel over the
next 6-12 months (from $38 a
barrel currently). In addition, meas-
ures like route rationalisation—the
airline cut services to several desti-
nations over the past two months—
and putting on hold expansion
plans, including deferring delivery of
some 80 aircraft, have helped rein in
expenditure. Mallya told BT after
KF ’s annual general meeting in
Bangalore on December 26 that he
expected the airline to break-even
operationally in December with
revenues of Rs 500 crore from pas-
senger, cargo and ancillary services.
“I think the worst is over and
there’s no reason why private equity
investors, who had expressed in-
terest when oil was at $100 a barrel,
shouldn’t be more interested when
oil is $36 a barrel,” said Mallya,
Vijay Mallya: who has been scouting for $400
“I think the worst is over” million (Rs 1,950 crore) capital for
his airline over the past six months.
BHASKAR PAUL
His talks with PE firms have been
stuck over issues of valuation.
But Mallya may now get what
he has always wanted—an over-
seas airline as a partner—as there is
news that the government may al-
low foreign carriers to pick up eq-
uity in their Indian counterparts.
Mallya would prefer a strategic
partner, for he believes that it will
not just offer a better valuation,
but would add value to KF’s own
operational efficiency. British
Airways, Singapore Airlines and
Virgin etc., could be possible
suitors, but Mallya, in an e-mail
response to a BT query, offered no
more than “there is no point in
discussing something that is
currently not permitted”.
That Mallya is in high spirits
again is evident from Kingfisher’s
plans to start services from
Mumbai to London Heathrow,
Singapore and Hong Kong as well
as a flight between Bangalore and
Colombo over the next 6-8 weeks.
He has also followed other air-
lines in cutting fares and offering
sops to boost sales. Clearly, he is
feeling buoyed by the expected
good results for the December
quarter. But as industry experts
say, Mallya’s challenge lies in ext-
ending that performance to the
last quarter of 2008-09.
Current II-January 25.qxd 1/3/2009 4:52 PM
bt current
Are Good Times Here Again?
Low ATF prices and a possible shift in FDI policy for aviation hold out prospects
of a speedier turnaround for Kingfisher Airlines. K.R. BALASUBRAMANYAM
G
OING INTO THE THIRD
quarter of 2008-09, Vijay
Mallya’s Kingfisher was the
most troubled airline in India (refer
our cover story Saving Kingfisher,
BT, December 14, 2008). The car-
rier had accumulated losses of Rs
2,500 crore thanks largely to an
unprecedented surge in Air Turbine
Fuel (ATF) prices over the previous
six months. Kingfisher’s projected
losses for 2008-09 at Rs 1,500
crore was more than twice the es-
timated total profits (Rs 600 crore)
of UB Group companies! But a slew
of recent pricing developments and
policy murmurs suggest that the
worst may be over for the airline
Page 3
and its turnaround may happen
sooner than expected (see Mallya
interview “We can wipe out our
losses in three years”, in the same
December cover story).
With crude cooling
off over the last two
months, low ATF prices
have helped bring
down Kingfisher’s fuel
bill (the exact figure
will be known when KF
announces its third
quarter results). In
a recent presen-
tation, Kingfisher
said it expected
crude to settle
at around $70-90 a barrel over the
next 6-12 months (from $38 a
barrel currently). In addition, meas-
ures like route rationalisation—the
airline cut services to several desti-
nations over the past two months—
and putting on hold expansion
plans, including deferring delivery of
some 80 aircraft, have helped rein in
expenditure. Mallya told BT after
KF ’s annual general meeting in
Bangalore on December 26 that he
expected the airline to break-even
operationally in December with
revenues of Rs 500 crore from pas-
senger, cargo and ancillary services.
“I think the worst is over and
there’s no reason why private equity
investors, who had expressed in-
terest when oil was at $100 a barrel,
shouldn’t be more interested when
oil is $36 a barrel,” said Mallya,
Vijay Mallya: who has been scouting for $400
“I think the worst is over” million (Rs 1,950 crore) capital for
his airline over the past six months.
BHASKAR PAUL
His talks with PE firms have been
stuck over issues of valuation.
But Mallya may now get what
he has always wanted—an over-
seas airline as a partner—as there is
news that the government may al-
low foreign carriers to pick up eq-
uity in their Indian counterparts.
Mallya would prefer a strategic
partner, for he believes that it will
not just offer a better valuation,
but would add value to KF’s own
operational efficiency. British
Airways, Singapore Airlines and
Virgin etc., could be possible
suitors, but Mallya, in an e-mail
response to a BT query, offered no
more than “there is no point in
discussing something that is
currently not permitted”.
That Mallya is in high spirits
again is evident from Kingfisher’s
plans to start services from
Mumbai to London Heathrow,
Singapore and Hong Kong as well
as a flight between Bangalore and
Colombo over the next 6-8 weeks.
He has also followed other air-
lines in cutting fares and offering
sops to boost sales. Clearly, he is
feeling buoyed by the expected
good results for the December
quarter. But as industry experts
say, Mallya’s challenge lies in ext-
ending that performance to the
last quarter of 2008-09.