Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Tag: kingfisher airlines

Let Kingfisher Go Bankrupt

It is a crime on the part of State Bank of India to give a loan of 1,650 crore rupees to Kingfisher. Some of it will be in the form of bank guarantees. It is ridiculous for RBI Deputy Governor K. C. Chakrabarty to say this was a professional decision and may help Kingfisher pay back all its loans. This is a very unprofessional decision. What will RBI do if SBI does not get its money? Print notes and give it to SBI?

Kingfisher had defaulted on its loan from SBI and many other banks. Loan from SBI was converted into shares at Rs.64.48 per share when the market value was Rs.48 per share and now the value is less than Rs.20 per share. It resulted in loss to SBI and consequently Moody’s downgraded SBI and put other lenders to Kingfisher on watch list. The government of India had to give money to SBI to save it. Public sector banks are the property of the people of India. They are not the property of ministers. SBI’s decision defies business sense. Who ordered SBI to take the decision? Is it Finance Minister Pranab Mukherjee or someone else? Is it an oral or a written instruction? SBI should not hide behind client confidentiality which is meant to protect defaulters. There should be a law that makes it obligatory for banks to display the list of borrowers, the amount borrowed, amount paid, due dates and defaults on their web sites. Those banks do not have web sites should have web sites.

Kingfisher was in trouble in November 2011. That time many flights were cancelled. Manmohan Singh found ways to get Kingfisher out of trouble. After three months flights are cancelled again. Kingfisher should have shutdown when it was unable to pay loans to banks. Vijay Mallya will keep profits he makes from liquor business and invest in IPL and Formula 1 and the losses he makes on Kingfisher are to the people of India. Vijay Mallya said “Closing down is not an option. It will not happen. Government does not want it to happen. It is not in national interest.” Who from the government said they don’t want Kingfisher to shut down? Kingfisher is a non-performing liability and saving it is not in national interest.

When flights are cancelled passengers should be refunded whether they paid in cash or through credit card or travel agent. It is wrong to make passengers who paid through credit card or travel agent wait for three weeks by routing refunds through agents. Passengers should not be asked to revalidate tickets for future use.

Kingfisher being one word the abbreviation for Kingfisher Airlines should be KA and not KFA as many TV channels do.

All types of excuses are given to bail out Kingfisher. One is that it is done for the benefit of passengers. If Kingfisher is shut down passengers will use other airlines. Another excuse is that it is not about an individual but about the company. Veerappa Moily said “I am not in favour of closing down any company. We saved Satyam. But it was not about an individual, but about the company.” Satyam should not have been saved and B. Ramalinga Raju is still free. Instead of being in jail he was in ICUs and ran his business from there. Third excuse is that aviation industry is facing crisis and private airlines are bleeding severely. Indigo is making profit. Other airlines should find their ways to make profit or shut down.

Kingfisher’s licence should have been cancelled by this time. DGCA Bharat Bhushan said “Such an action will only precipitate matters. They are among the largest airlines, and we cannot ask them to shut down. I will have to consult the ministry before initiating any such action.” It means small airlines will be punished for violating rules and causing hardships to passengers but large airlines will not be punished whatever they may do. Someone said DGCA safety surveillance is a joke. They just fill forms. Bharat Bhushan may consult the ministry but as DGCA he is responsible for his actions.

A person who had deducted tax at source but not deposited with Income Tax Department would have been in jail. In Kingfisher’s case 170 or 200 crore rupees were deducted as tax but not deposited and IT Dept freezes bank accounts and Vijay Mallya is free. In December 2011 Kingfisher accounts were frozen and after some days defreezed.

Kingfisher has defaulted on loans, has not paid taxes deducted at source, owes money to oil companies and salaries to employees. Let it go bankrupt.

Cancel Kingfisher Licence

Kingfisher is in trouble again. It has cancelled flights without informing passengers and DGCA and passengers are suffering. DGCA should cancel its licence. Excuse of bird hits should not be accepted. Passengers book their tickets in advance. When they come to the airport and know flights are cancelled there is not much they can do. To get tickets on other airlines they may have to pay more.

Ajit Singh has rightly said there will be no bail out of private airlines. If airlines suffer losses they are responsible for them. Passengers pay the fare fixed by airlines. If on an average airlines lose 900 rupees per seat they should increase the average fare by more than 900 rupees per seat. As a consequence if some people stop airline travel so be it. Air travel is not supposed to be cheap.

Kingfisher has borrowed money from banks and has not paid them. It has deducted taxes but not paid them. Its employees do not receive their salaries for months. Vijay Mallya has money for IPL but not for Kingfisher. A cricketer gets hired for almost 10 crore rupees for 45 days. Pilots don’t get paid. It seems many pilots have left Kingfisher and joined other airlines. Kingfisher has 7,000 crore rupees debt. It would not have been more if government had not bailed him out by turning loans payable to government banks into shares. Vijay Mallya blaming Income Tax Department for freezing accounts is of no use. Pilots were getting notices for taxes deducted by Kingfisher over the years but not paid to the government.

Foreign airlines are expected to be allowed to invest in private airlines in India but no one has come forward. Perhaps they have their own problems. Recently Air Australia went bankrupt. Passengers were stranded in Honolulu and other places.

Air India also should not get bail out. The freebies and concessions its present and former CMDs, directors, pilots and other employees get should be abolished. High salaries should be cut down. Some pilots get almost one crore rupees per year.

Kingfisher is not aviation industry. If it goes down it will not be the end of industry. Over the years East West, Modiluft, Damania Airways and many other airlines have shut down and aviation industry continues.

Kingfisher Airlines and loan

Vijay Mallya is known as king of good times. He owns an IPL team. He owns a Formula One team. He constructs a multi-storeyed building beside a road named after his father. He hires models and has photoshoots outside India for his calendar. For all that he has money. He has no money to pay loan taken by Kingfisher Airlines which he owns. The airline has a loan of 6,000 crore rupees and he wants government to bail him out. Civil Aviation Minister Vayalar Ravi is ready to help him. Vayalar Ravi said “The aviation industry is facing crisis. These carriers may be privately owned but are Indian carriers, and the ministry will have to watch out for them.”

Kingfisher Airlines had defaulted on payment of oil bills. Some flights were cancelled and the airline was put on cash-and-carry system.

This is not the first time Vijay Mallya has approached the government for a bail out. Previously Kingfisher Airlines had a debt of over 7,000 crore rupees and State Bank of India, Bank of Baroda, Punjab National Bank, ICICI Bank, IDBI Bank and some other banks converted part of loan into shares at Rs.64.48 when the market price was around Rs.48. On remaining loan interest was lowered to 11% and repayment period was extended to nine years.

Public sector banks are the property of the people of India. They are not the property of the government. Ministers should know that. For too long there has been privatization of profits and nationalization of losses. Companies that make losses should be allowed to shutdown or go bankrupt. Board for Industrial and Financial Reconstruction should be wound up. Robbing the poor to pay the rich should stop. Vijay Mallya should pay the loan as per the terms agreed for borrowing. There should be no interest reduction or extension of payment period or conversion of loan into shares. Credit rating agencies have brought down the rating of State Bank of India. Vijay Mallya can pay from United Breweries or other companies. He can sell aeroplanes he owns. He can continue to be king of good times but not at the expense of India’s taxpayers.

Kingfisher Airlines said they had not requested for restructuring of second debt? Did they ask for loan write-off or conversion of loan into shares?

Vayalar Ravi should concentrate on Air India which has become a black hole gobbling up money. It has loans amounting to 40,000 crore rupees and there is no sign of improvement. Pilots and other frequently go on strike. No more loan should be given to Air India and if employees do not behave the airline should be shutdown. It is for the aviation industry to face the crisis and the ministry does not have to watch out for private Indian airlines.

India needs a movement stronger than Occupy Wall Street. Protesters should occupy offices of ministers, corporates and banks against such practices.

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