Could The Kingfisher Airline Crisis Be A Hoax To Grab FDI?

Posted on April 17, 2012 in Business and Economy

By Shruti Shreya:

“Passengers, we are sorry to announce a slight delay in our flights due to a financial glitch and hope to take off soon. Any inconvenience caused is deeply regretted.” So is the sad state of Kingfisher Airlines at the moment. With numerous flights cancelled, several routes withdrawn and excess staff laid off, Kingfisher Airlines appears to have busted both its engines mid-air and is steadily tanking toward a 7,000 crores debt.

But while the media is busy splashing its front pages and news bulletins with the updates on the supposed crash of the “Beer Baron” Vijay Mallaya’s Kingfisher Airlines, he may as well be having a soft landing in a distant land with a clever scheme of Foreign Direct Investments [FDI] acting as a parachute. In simple words, or in Business Standard’s words to be precise, all this hue and cry about the airline running into a loss could be a hoax.

It is being speculated that the crisis that Kingfisher Airlines is presently undergoing, or projecting, is just a stunt to manipulate the government into permitting direct foreign investments in the aviation sector. With the government currently mulling over raising the bar on foreign investments up to 49%, this new drama and push from the media may just allow Mallaya’s dream of having a foreign airline as a co-pilot on board KFA, a smooth take-off.

KFA being the only local carrier in desperate need for funds, Mallaya’s strategy is well placed. With great precision, he is busy knocking down the dominoes, one by one, by grounding about three quarters of the airline’s fleet, rolling-back almost all international operations, delaying or defaulting on salaries and outstanding payments, making it look like a house of falling cards. A possible illusion, that is being propagated through the media into creating pressure points for the government to seal the deal on the new FDI policies on aviation. The final domino, Business Standard says is that, “The overall impact of all these moves on increased air-fares is only adding fuel to the fire, further mounting pressure on the government to clear the policy, while it keeps consumers’ interests in mind.”

While this conjecture could easily be laughed off, an acute study of recent developments do seem to fit in like pieces of jig-saw puzzle that do not suggest otherwise. For example, just days before IPL-V, Mallaya managed to compensate his employees and within a few days managed to persuade the DGCA into not cancelling the airline’s licence and further convinced the tax authorities into thawing his bank accounts on the pretext that his airline can be revived.

Now unless Kingfiser Airlines, our desi damsel in distress, has suddenly been blessed by an angel, we might as well wait and watch as the government paves the path for a white knight in shining armor to come to its rescue.