Here is hoping that the outcome will lead to another boom in the aviation market and improve standards.
PVDtoDEL
Sep 14, 12, 2:06 pm
Kingfisher has so much debt that a foreign investor would find better RoI starting up a new airline compared to trying to turn the airline around.
Secondly, this isn't over yet. The specific reforms won't be released for another month or two. FDI by airlines also must be approved by the Ministry of Civil Aviation, another 4-5 month process.
Can Kingfisher stick it out for 6 months?
Yaatri
Sep 14, 12, 7:01 pm
Wirelessly posted (Samsung Galaxy S: Mozilla/5.0 (Linux; U; Android 4.0.4; en-us; SGH-T989 Build/IMM76D) AppleWebKit/534.30 (KHTML, like Gecko) Version/4.0 Mobile Safari/534.30)
Has any airline shown an interest in injecting capital into IT?
Which airline, if any, would be interested?
ashishp
Sep 14, 12, 8:09 pm
Havent gone into the details yet, but from I am given to understand, there is a cap of 49% and the policy for Aviation FDI specifically excludes airlines and aviation companies from taking a stake.
PVDtoDEL
Sep 14, 12, 8:21 pm
Havent gone into the details yet, but from I am given to understand, there is a cap of 49% and the policy for Aviation FDI specifically excludes airlines and aviation companies from taking a stake.
That was the former policy. Yesterday, CCEA passed a proposal to allow airlines and aviation-related companies to also invest.
Mr. Bean
Sep 14, 12, 8:24 pm
my guess would be BA, or perhaps VS
PVDtoDEL
Sep 14, 12, 8:36 pm
BA and EY are the 2 airlines which are said to be interested. I doubt either will actually be willing to touch the carrier.
A2A
Sep 15, 12, 3:35 am
BA and EY are the 2 airlines which are said to be interested. I doubt either will actually be willing to touch the carrier.
a few months back BA was interested. not sure what will a new due-diligence show up for them to be interested anymore. EY can be a different ball game altogether. it is working on creating its own alliance of sorts with abu dhabi being the centre of the world!
d3vski
Sep 15, 12, 4:31 am
As I have stated before, if Kingfisher get a partner who is prepared to refinance the debt into something long term, say 15 - 20 years, they can consolidate and slash the interest rates on the current payments and thus grow hems elves out of debt.
Similar to what the USA is doing with their economy. Slash costs and grow yourself out of debt.
Now only if Europe can get over their fake brotherly "we are all in it together" mantra and actually ditch the euro!
Yaatri
Sep 15, 12, 7:52 am
As I have stated before, if Kingfisher get a partner who is prepared to refinance the debt into something long term, say 15 - 20 years, they can consolidate and slash the interest rates on the current payments and thus grow hems elves out of debt.
Similar to what the USA is doing with their economy. Slash costs and grow yourself out of debt.
Now only if Europe can get over their fake brotherly "we are all in it together" mantra and actually ditch the euro!
Big difference between the U.S. and IT. The U.S, strategy is not growing out of debt, but inflating out of debt. The difference here is, that the U.S. can inflate the currency of its debt while IT can't.
How will ditching Euro help Europe. I would like that if it happens, but not because it will help Europe.
Nonetheless, it would help if the debt could be rolled over into long term debt so that it can reduce the cost of servicing its debt (overall cost of debt will not be reduced unless some of its debt is written off).
IT have a net worth? What is its capitalisation? why would anyone want to convert their "saving" (cash) into accounts receivable, that will have to be written off?
Even if a generous investor with deep pockets was willing to take a chance in the hopes that IT will recover, the playing field is changing every day. How many carriers can Indian market support?
As is evident from the volume of complaints in this forum:
People talking of suing them for perceived wrong when the airline did nothing wrong and the whiner was the one who was wrong,
Almost everyone wanting to fly premium without paying for it
Almost everyone thinking that they ought to pampered because of their elite status achieved through a credit card with which they offered to use when their friends were buying something with cash,
Whining about not getting that free upgrade or that the food was diabetes inducing.
You get the picture. The Indian consumer with very little experience of flying, but plenty of expectations based on hearsay and depiction in movies or commercials has suddenly found him/herself in the market. Rather, the Indian carriers have found themselves in the hands of immature Indian consumer. It's a difficult job for an airline to handle the Indian consumer. Low spending and high expectations, refusing to accept the reality of business. IT made it worse by pandering to these novice travellers, Now it's difficult to put the "jin/gin" back in the bottle.
Growth in Indian aviation is piggybacking the Indian GDP. If Indian economy doesn't grow as fast enough, growing for an airline would be even more difficult.
What are Indian laws regarding corporate bankruptcy. Can IT reorganise itself under bankruptcy protection? This has helped many U.S. airlines. I lost a substantial sum in NW bankruptcy. How often do you hear me complain about NW or DL? Quite a contrast from the typical Indian consumer here.
rurouni212
Sep 15, 12, 12:00 pm
While many parties will see this as a welcome move, I can't help but think that it's too late for IT. Given Kingfisher's shrinking market share, poor public perception due to curtailed and cancelled flights, unsustainable business model and the black hole that is their finances, a foreign airline would be better off starting up a new carrier or trying their luck with any of the other current carriers.
Keyser
Sep 15, 12, 12:38 pm
Can Kingfisher stick it out for 6 months?
i think it can & it will....
PVDtoDEL
Sep 15, 12, 2:02 pm
i think it can & it will....
Well, then this might work out for IT... However, I'm inclined to think with the total lack of cash and the awful employee morale, something is going to snap sooner rather than later.
CXBA
Sep 16, 12, 1:18 am
Mallya is surely a person that elicit strong reactions, and the forum is witness to that. However thinking that the proposed law about foreign investment is enacted just to suit him is oversimplifying the issue. At this moment the aviation sector in India is in deep trouble, if we look at the three principal carriers here, AI, 9W and IT. All of them will benefit from both capital infusion and operational expertise from foreign investors. It is not unthinkable that GoI, faced with the prospect of helping all of these stalwarts with tons of money, instead decided to send the ball out into international court and see who's willing to pick it up. I'll be especially curious to see if the well known European carrier that some times ago created a ruckus refusing admittance to the Indian flag carrier to its own alliance will be prepared to support either it or their long courted replacement, and if this is the final price GoI put forward to "forget" the past issues :cool:...
GUWonder
Sep 16, 12, 8:14 am
Mallya is surely a person that elicit strong reactions, and the forum is witness to that. However thinking that the proposed law about foreign investment is enacted just to suit him is oversimplifying the issue. At this moment the aviation sector in India is in deep trouble, if we look at the three principal carriers here, AI, 9W and IT. All of them will benefit from both capital infusion and operational expertise from foreign investors. It is not unthinkable that GoI, faced with the prospect of helping all of these stalwarts with tons of money, instead decided to send the ball out into international court and see who's willing to pick it up. I'll be especially curious to see if the well known European carrier that some times ago created a ruckus refusing admittance to the Indian flag carrier to its own alliance will be prepared to support either it or their long courted replacement, and if this is the final price GoI put forward to "forget" the past issues :cool:...
The FDI allowance changes that are to open things up for the aviation sector financing are part of a broader political economy strategy of the government that covers way more than just this sector and is part of signal setting, more so internationally. You can bet your miles that this announced change was a PM and P.C(hidambaram)-run show with an audience in mind even beyond the aviation sector.
Yaatri
Sep 16, 12, 9:14 am
The FDI allowance changes that are to open things up for the aviation sector financing are part of a broader political economy strategy of the government that covers way more than just this sector and is part of signal setting, more so internationally. You can bet your miles that this announced change was a PM and P.C(hidambaram)-run show with an audience in mind even beyond the aviation sector.
Exactly. There are issues that are unrelated to one's personal interest.
This is a very common problem in this forum people try to explain things in terms of a very limited set of constraints and parameters, which leads to narrow conclusions.
FDI in retail had a bigger push behind the decision. With the economy in doldrums, high inflation and falling rupee, the PM had to do something to increase investor confidence. It's much more than the Indian aviation sector that's at stake. The entire economy is.
Certainly whether Jetwhiners get there upgrade or not is is the least relevant here. ;)
k819
Sep 16, 12, 11:51 am
Mallya is surely a person that elicit strong reactions, and the forum is witness to that. However thinking that the proposed law about foreign investment is enacted just to suit him is oversimplifying the issue. At this moment the aviation sector in India is in deep trouble, if we look at the three principal carriers here, AI, 9W and IT. All of them will benefit from both capital infusion and operational expertise from foreign investors. It is not unthinkable that GoI, faced with the prospect of helping all of these stalwarts with tons of money, instead decided to send the ball out into international court and see who's willing to pick it up. I'll be especially curious to see if the well known European carrier that some times ago created a ruckus refusing admittance to the Indian flag carrier to its own alliance will be prepared to support either it or their long courted replacement, and if this is the final price GoI put forward to "forget" the past issues :cool:...
And neither will any other carrier, since the big three Indian full service carriers need major restructuring on the operational side, which a minority partner cannot enforce. The current FDI proposal is kind of 'hand us your money, we'll plug some holes and see what we can do'. :p
GUWonder
Sep 17, 12, 8:45 am
And neither will any other carrier, since the big three Indian full service carriers need major restructuring on the operational side, which a minority partner cannot enforce. The current FDI proposal is kind of 'hand us your money, we'll plug some holes and see what we can do'. :p
There are ways for 49% shareholders to enforce operational restructuring. One of a few ways to reach that outcome involves the company fragmenting the cap table so as to dilute down other large shareholders while the original 49% shareholder maintains or achieves a plurality bordering on majority ownership.
Where there's a will and smart money, there's a way as long as the other shareholders don't protest and/or invoke a right of first refusal to any share offerings so as to interrupt the plan.
That said, I don't expect any competent foreign party to want to jump into picking up a (larger) controlling stake in AI or IT.
" Jet AirwaysBSE -0.03 % and Etihad Airways are in discussions for a possible deal that could see the Middle-Eastern carrier pick up a minority stake in the country's oldest surviving private airline, according to three people familiar with the talks."
There is no such airline and VJMallya is bluffing, and if it where, they are foolish to invest in KF which has a huge amount of debt. Unless the debt can be magically transformed to another KF entity, no airline would touch this.
Only Jet, Spicejet, Indigo and Go Air may attract investments, and of these four, the investing airline would only be interested in Spicejet or Go Air which would allow them to leverage the domestic traffic and exercise some control. Indigo, to my knowledge is not actively seeking investment.