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Capt Gopinath has a solution for Kingfisher, AI
These are troubled times for the 'King of Good Times', Vijay Mallya. His airline, Kingfisher has been hogging the headlines for all the wrong reasons.
Several flights have been grounded. With its accounts frozen, the staff are yet to receive their salaries.
Uncertainty prevails over how the airlines will tide over the crisis, as it has suspended all international flights.
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Capt Gopinath has a solution for Kingfisher, AI
Captain Gorur Ramaswamy Iyengar Gopinath who pioneered low cost flying through Deccan Airways feels that the best way out of the crisis is to convert all the debt into equity and appoint a professional board to revive the airline.
Captain Gopinath's airline which was rebranded Kingfisher Red after it was sold to Mallya for a sum of Rs 1,120 crore (Rs 11.20 billion) also feels that a professional board must to be appointed to save the airline.
Captain Gopinath talks to rediff.com about the Kingfisher crisis and suggests ways on how the airline can wriggle out of this situation.
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Capt Gopinath has a solution for Kingfisher, AI
One must think of the 10,000 plus employees associated with the airline first. Taking action against the airline for their anger against Mallya is not the solution. The government must act fast and be decisive.
Firstly, the banks should convert the debt owed by Kingfisher into 100 per cent equity at the market value.
Through this, they may recover only a part of the debt and in order to recover the balance they should mortgage shares and assets of the promoter and his holding company.
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Capt Gopinath has a solution for Kingfisher, AI
Further, the government should also take complete control of the airline. They should hand it over to professionals who will be capable of stabilising operations and sell it to new investors.
Through this the government can ensure that the airline is stable and many jobs could be saved apart from saving the assets as well which could deteriorate soon.
If this is not done then it would be very difficult to bring back life into the assets.
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Capt Gopinath has a solution for Kingfisher, AI
The government must also take into consideration that there is no vacuum created in the airline sector.
This would only lead to a complete mismatch in demand and supply which would lead to flying costs soaring and also cartelisation.
Bringing in new airlines at this point to fill a vacuum is also not the solution as this process could take nearly 5 years.
A smooth transition is the solution to the problem like how the government did in the case of Satyam Computers.
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Capt Gopinath has a solution for Kingfisher, AI
This would be an ideal solution because if one allows bankruptcy it would not be the choice as the banks would anyway lose everything.
It would also cause lot of problems to the employees and small investors who would also go bankrupt.
Vijay Mallya had recently sought a bail out from the government of India, but he was told that it would be privatisation of profits and socialisation of losses.
There is an increasing chorus against a bailout, but there are certain factors that are likely to go against him when he seeks a bailout.
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Capt Gopinath has a solution for Kingfisher, AI
Shooting hot models in fancy destinations, running a cricket team or an F1 team are factors that are not likely to go in his favour when he seeks a bailout.
His flamboyant lifestyle is something that could go against him in case the tax payer has to save the airline.
Mallya, however, does claim that he owes no one an explanation regarding his lifestyle as he pays his taxes.
He may be filing his personal income tax, but the fact is that there is Rs 400 crore (Rs 4 billion) in tax that is not paid and there are dues which exceed Rs 2,000 crore (Rs 20 billion) and not to mention the unserviced bank debts.
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Capt Gopinath has a solution for Kingfisher, AI
Moreover, nearly half the fleet of the airline is on the ground for want of parts. While on one hand this is the case, on the other he buys exotic islands, yachts and villas. The ideal thing to do would be deal with this with humility, pay the price and move on.
On Kingfisher Red, which was Deccan Airways, I feel that it was a mistake to club the airlines together.
Everything should have been converted into Kingfisher Red and all domestic routes should have been under this name and the international route under Kingfisher Class.
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Capt Gopinath has a solution for Kingfisher, AI
The other airline which needs an assessment is Air India. It needs to move towards privatisation and the employees should be taken care of.
Airlines such as British Airways were privatised over a period of 8 years and it was successful.
Moreover, unlike Kingfisher, Air India is rich in assets when it comes to land holding and buildings. It would be better if the assets belonging to Air India are put into a separate entity and the funds obtained through the sale should be used to compensate the employees.
The remaining money could be stored in the treasury and then the airline would be completely privatised.
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Capt Gopinath has a solution for Kingfisher, AI
The government needs to create a good aviation sector. The government headed by the Prime Minister needs to step in, in order to create a long term plan for the aviation industry.
A system ought to be built to sustain the aviation sector instead of coming up with individual policies that suit Jet Airways or Kingfisher or even Air India.
We need to adopt the Singapore model where manpower, a great economy and aviation being treated as core infrastructure be adopted. We need to act fast, else it would be too late.