FDI nod: Too late, too little for Kingfisher, says Bhargava

Jitendra Bhargava: former executive director, Air India, says that the decision has come in very late had this decision come in early 2011 we could have put some hopes for salvaging Kingfisher. With high debt on their book, low market share of 3.5% and fleet of 9-10 aircraft, I don’t think any foreign carrier would be keen of putting money at this juncture.

Below is the edited transcript of his interview to CNBC-TV18. Q: Aviation FDI in domestic carriers has been finally allowed, is it too late in the day for a company like Kingfisher?
A: Yes, the decision has come in very late had this decision come in early 2011 we could have put some hopes for salvaging Kingfisher. With high debt on their book, low market share of 3.5% and fleet of 9-10 aircraft, I don't think any foreign carrier would be keen of putting money at this juncture. India does not have an environment which is conducive for profitability in the aviation sector.
Only because of some default some airlines have shown good results in last few quarters. Kingfisher dropped its market share in the last 12 months and the other carriers gained. The government needs to take many decisions to make the environment more conducive for profitability. The biggest plight is ATF.
There is no rational for a foreign carrier to put in money when they know for sure that this airline in which they are putting in money is not going to generate surpluses. How long can people keep putting money? Q: The government has finally decided to do what it has done - you clearly don't seem to be enthused about it and because of your long experience in the sector one would tend to agree with you but at least as far as the signal is concerned, at least as far as non strategic capital inflows into the Indian civil aviation sector, any hopes that you have because this is what we are picking up from other experts we have been speaking about policy moves?
A: Overall it is a positive step. The government has taken key decision after several months. I answered to your question specifically on Kingfisher. This policy will help Spice jet, Go Air and carrier which will be applying to start business. 
This is going to go a long way there is no denying the fact, the Indian aviation industry does need capital infusion, technological and strategic help from foreign carriers, to enhance productivity and the government, ATF is one factor. Infrastructure, congestion at airports, policies can help. All these need to be taken by the government because a foreign carrier is unlikely to put in money if they are not assured of returns.
India’s economic growth story is a good story for a foreign carrier to be attracted but not when they are unsure of getting returns on investments they are putting in.
The whole policy decision has been taken to help Kingfisher at this juncture and a policy is unlikely to help because the debt just too high and unless Vijay Mallya can muster financial support from other sources in addition to a foreign carrier, one can give hopes other wise no hopes. RELATED LINKS:

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