Indian Aviation: First Blood Drawn?

Capt Murthy

You are abolutely right.

The fact is even for an MBA the numbers dont add up. :-). Having said that, I see only two airlines surviving this blood letting - Deccan (as they have managed their costs very well) and kingfisher (as they offer the best value for money).......

I agree with you on the fares part...prices will go up.....eventually.....

One query I have is who is losing this 1800 crores?- Promoters,private investors or financial institutions?

rgd

Thanks for your comment Chandra. The figures given (Rs.1,800 crores) is an estimate by business standard and others about how much the combined losses from all the Airlines is going to be. In cases where the Airline ahs gone public, investors and shareholders holding Airline stock will also lose money obviously, if the stocks value goes down with the results.
I am not sure that Air Deccan can ride it out because they have costs under control but still suffer losses of Rs. 200 per seat (as Capt. Gopi mentioned yesterday on online news) and multiply 8 million passengers and you get the picture. As for Kingfisher, they continue to make losses as well and what keeps them going is not so much the offer of best value for money but due to deep pockets of the promoters. Dr. Mallya made a statement some time back on IBN saying that he can underwrite losses for some years!
My opinion is that while all Airlines bleed for some more time to come, some having deep pockets or the ability to keep getting financial investors to invest (like Air Deccan) will continue to float around. They are waiting for those without deep pockets to shut shop.Indus shutting down will not have a great impact on the aviation scene in India but a few big names closing can have disastrous results.

Let us hope for the best.

Interestingly, I found that ICICI actually made a neat profit out of selling part of its stake to UBS. I guess the guys who finance know their way around.

rgds

would it have been less interesting if they made a loss ?

Chandra: good that you brought up the ICICI/UBS deal in this. Right you are indeed. ICICI must be laughing all the way to the bank (intended!). Yes, let us hope for the best.

Kela: Good question!

Capt Murthy

The little that I know about Mallya's business, I dont think he has the kind of deep pockets he asserts in his interview with IBN. I suspect at some level he either wishes to sell off (he will surely get a good return) or at another level pray that there would be very few players (more likely).

The reason I said value for money (Kingfisher) in my first post is because thats how consumers rate them. They are rated ahead of all brands on customer service and on par with most brands on price.

rgds

Cannot disagree with you Chandra! Incidently, I saw an early interview on IBN (again) with Dr. Mallya and he indicated that he was not averse to selling the Airline if he got a good valuation for it. He must be thinking of that option as well. I have used KingFisher flights while in India and people are indeed happier flying them as opposed to any other carrier. The customer service is good but it is costing them money providing free meals and goodies bag etc. They started out saying that they were a premium low cost airline and offered the same high density seating in their single class A320's (then) and somewhere along the way, they thought that they would get better yeild on their seating if they became a full service carrier with a first class section as well. On one side it seemed that he ws taking on Air Deccan and on the other side he was trying to make a big dent in Jet Airways First Class passengers and many switched over. Whatever he does, even changing business tactics mid-stream, he still makes the news! Thats all right though.

Capt Murthy

What is your take on the Deccan overbooking scandal?

rgds

Chandra: I have been reading about it online like others and latest news is that the DGCA has concluded their "investigations" into these allegations, here is the link to that story:
http://www.business-standard.com/compindustry/storypage.php?leftnm=1&subLeft=1&chklogin=N&autono=280047&tab=r

One can hope for results of their investigations to be made public. From what I have read, and if it is true as alleged, it is a scam indeed and one that could put them out of action for a while based on their actions.

I have also read that they have been over loading their airplanes as well, going so far as offering a flight attendant's seat to a passenger. Now that is a far serious offence, one that violates Air regulations and hopefully DGCA has done some investigations into that matter as well. Air Deccan's image has taken a beating and sometimes it feels like they are their own worst enemy!