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Sreenivasan Jain: Hello and welcome to this NDTV exclusive, Ajit Singh has taken over the civil aviation ministry at what some would argue at the most challenging times both for the industry and for some of its leading airlines many of whom are virtually struggling to stay afloat. He now joins me for an exclusive interview, thanks very much sir for joining us. Mr Singh many people believe that the government is going out of its way to protect private airlines like kingfisher which are very much at the brink of their day to day functioning why is that , why is there this perception ?


Ajit Singh: Mr. Jain it’s not a single airline whole aviation sector is under financial stress, economic down turn, European death crisis, and the rising cost specially the fuel that has put them under financial stress. whatever action we are taking for this sector as a whole of course we don’t want to close down any airline for that government doesn't want any industry to close down, because that creates problems for the passengers , that will create problems for the employees, all kind of problems.  


Sreenivasan Jain: But at the same time if an airline for whatever its own reasons, there could be some external reasons which are common to the industry, such as those you mentioned but there are also mismanagement there is also business practices or business modules which may not be viable, which may lead to certain airlines to be in greatest stress than others

Ajit Singh: You are right, you are definitely right

Sreenivasan Jain:  But there can’t be any favoritism towards those airlines?

Ajit Singh: Listen have the banks given any money to those airlines , has the government asked banks to loan them or anything, hasn't DGCA been very vigilant and calling them and special audit, safety audit for each flight of kingfisher , our concern is that the operator maintains its schedule and there is the passenger safety is not jeopardized, we are not going to go in their financial problems whether they are getting loan or not getting loan


Sreenivasan Jain : But it’s not just that Mr. Singh I tell you what is happening with kingfisher , they are not maintaining their schedules as per the DGCA , they are not paying their staff including their pilots, they are not paying their banks, they are not being able to pay for their petrol , they are not able to pay service tax , they are not able to pay income tax , they are not able to pay the airports , despite that they are still operating which many says only because of the government intervention, it may not be a formal intervention but it’s an informal intervention and that is what some people are calling unfair.


Ajit Singh: See what’s happening is if you see from more than 400 flights they are down to 100 flights , and according to rules if they maintain 5 planes and there are certain amount of equity , their license will not be cancelled now they have been telling DGCA, that they been giving the plans and you are right they are not adhere to them and they are on cash and carry business , petrol companies and airport authorities also.


Sreenivasan Jain: Yes their also the huge debt to the airport authorities and to the airport companies, considerable amount of money,


Ajit Singh: As you mentioned the ITA also are in problem with them.


Sreenivasan Jain:  And sir there's also staff hasn't been paid for 4 to 5 months ,which is a very worrying thing in an airline industry.


Ajit Singh:  I agree with you that they are in lot of problems and as you rightly said when we make sure safety, the financial stress can also cause problems because pilots and mechanics even stewards is none of them have been paid, all these problems have been there, but they have been coming up with plans , how they will manage it and this is also true that they have not adhere to those plans


Sreenivasan Jain: So therefore that what action is the government is going to take ??


Ajit Singh: So now you might have read in the papers also today that DGCA has called them to find out because last time they were given some time and they'd given a plan but they have not stuck to that plan, so today or tomorrow I think Mr. Mallya will be called and see what plans he has.


Sreenivasan Jain: Suppose if you not satisfied with those plans, will you then consider taking action?Whether it involves a partial suspension or whatever it is , whatever is there in your parts?


Ajit Singh: See if DGCA gives a report that safety cannot be assured with all kinds of problems they have then certainly we will take action


Sreenivasan Jain: Ok if the DGCA feels that safety cannot be assured under these conditions, you will take action?


Ajit Singh: Yes, certainly certainly.


Sreenivasan Jain: Whether that involves suspending the airline even if comes to that is the action you will take?


Ajit Singh: Not only suspending we can cancel their license also


Sreenivasan Jain: You can cancel the license if it comes to that?


Ajit Singh: Yes Yes. Let me tell you that government, we have not asked banks, again and again i have said banks will loan money



Sreenivasan Jain: I’ll come to the banks in just a second because we have spoken to the DGCA and he said that on records that the situation as it stands cannot continue he said that the financial stress is certainly a cause for concern even if on safety parameters we are satisfied, the financial stress is a cause for concern. The schedules are not being too stuck to and the answers we have got from them are not satisfactory and the exact word he used is this situation cannot continue, so?


Ajit Singh: I fully agree with him, but let’s see what report he gives today or tomorrow. What the final plan Mr. Mallya has to save the airline.


Sreenivasan Jain: Ok. But you were telling me that as far as you are concerned, the government is concerned that you are not putting pressure on any of these stake holders to give kingfisher a long rope a lease of life, whether it’s the airport authorities, banks, all agencies.


Ajit Singh: See they have not paid as you mentioned the airport authorities, they were put on cash and carry, and they have not been able to maintain that also, so now DGCA has to look in to all those things, that’s a part of the financial problems they are going through.




Sreenivasan Jain: So to those who claim that there has been some kind of political protection for kingfisher airlines, because of the fact that Mr. Mallya veils considerable clout, he is also a Rajya Sabha MP, what would u say to them? Has there been an additional rope or extensions that they have got?

Ajit Singh :  Let me put it this way. Any airline that undergoes such problems that kingfisher is undergoing, don’t forget they had around 20% traffic. Imagine if we immediately close them down as you are saying.


Sreenivasan Jain: No now they have come down to about 10% of the market.


Ajit Singh: You are talking about the influence n paddling in the last few months, 6months or so. When they started having these problems, they had 22% of the passenger traffic. And you don’t expect any government or authority to just to close them down. That would have created chaos.


Sreenivasan Jain: I don’t think it’s anyone’s  case, that airlines or any industry should be shut down for no reason. It’s only after a period of time when you see that all the parameters are not being met.


Ajit Singh:  Let me put it this way. Let’s stop at this point in time and say now if the DGCA feels or if everyone feels including the press and the ministry that it is the final chance that kingfisher has to give a credible plan, which they can adhere to save themselves.


Sreenivasan Jain: This is now reached that absolutely that final stage?


Ajit Singh: Yes. It just cannot continue like this. See from 64 planes they went to 28. Now they are down to 18. And the worst thing is that see if u plan for that, then it’s not a problem.


Sreenivasan Jain: But there doesn’t seem to be any planning.


Ajit Singh:  Yes. But it’s not under the kingfisher management control either.


Sreenivasan Jain: Do you feel there has been a case, in the case of kingfisher of apart from all the sectorial problems, which are common to everybody, but there has also been mismanagement and lack of planning, because there are other airlines that are doing well. It’s not that everyone is doing badly.


Ajit Singh:  It’s not for the government to point out to any business person what kind for plan he should have, what kind of business model he should have. We can’t comment on that.


Sreenivasan Jain: But this is a strategic sector. And you are also observing it very closely that is why i am asking you.


Ajit Singh: No any sector and any businessman, if his plan does not work, he will end up in trouble as kingfisher is in trouble.


Sreenivasan Jain: So u feel that there is an argument to be made that it is not just common sectorial problem, and there has been some degree of mismanagement?


Ajit Singh:   As You rightly pointed out not every airline is in trouble, not only the low cost but even the general jet.


Sreenivasan Jain:  Jet is having problems but not as bad.


Ajit Singh:  Yes. Having said that u will also have to admit that it is not only India but worldwide aviation is going thru a crisis. Quanta’s, the Singapore, emirates. all their profits r being slashed. So therefore a worldwide problem is there. But then sum businesses will survive and sum will not survive. And that’s y when people cum i say fare control and this, I say its free enterprise. When there is competition, some companies are bound to not succeed. And the government will as usual try because where public welfare is concerned; we see what can be done so that they run well. But we are not going to go out of the way to help any private company.




Sreenivasan Jain: What are the implications, if an airline like kingfisher either face a suspension or termination? What are the implications for the aviation industry?


Ajit Singh: When something like this is happening and u go not adhering to schedules, cutting down their planes and all that, all kinds of problems will be there. But it’s not very difficult to lease planes for other airlines and fill up that gap.


Sreenivasan Jain: So other airlines could grow to fill that gap.


Ajit Singh:  Yes.


Sreenivasan Jain: So in that case it’s not such a serious crisis as initially it was perhaps being made out to be because the airline industry in India is still large enough and there is still enough competition.


Ajit Singh:  You are right. But don’t forget that this is a very high profile business. People when they have to go somewhere they can’t wait. They have to get there, and many times these plans are made in the last minute and if one airline goes down then maybe he will have to book one week earlier. May be he will have to pay more money. So all these concerns may seem trivial afterwards, but at that point in time they are very serious concerns.



Sreenivasan Jain : One of the things that Dr. Mallya has been saying and which the government now seems to have done a loud thinking about is this bringing in of foreign airlines and allowing them to invest 49%in the airline sector here. Earlier it was only 49% FDI but now the finance minister said during the budget that we are actively considering allowing foreign airlines to invest 49%. What does actively considering mean?



Ajit Singh:  No we made a proposal to the Commerce Ministry, Aviation Ministry has sent a proposal. Then they will move to either the economic affairs or the cabinet. Final decision has to be taken be the cabinet. And don’t forget FDI has been there 49% as you said. It’s highly capital intensive industry. There are cycles and it is not that easy that you just hire a plane and you go and sit on it and you get there. It’s technically very demanding very difficult.



Sreenivasan Jain: And you as a skilled engineer yourself will probably understand that. So its capital intensive, its technology intensive, you are saying that this proposal is going to the cabinet. Do you foresee any objections, any hurdles at all?



Ajit Singh:  No, don’t forget we have 49% FDI already there. All we are doing now is allowing the airlines to participate in that.



Sreenivasan Jain: But there has always been sensitivity about actually allowing foreign airlines to participate. Hence the reason to have differed that decision for so long?



Ajit Singh:  Whatever the sensitivity is, 100% foreign equity is allowed in cargo. 100%foreign equity is allowed in airports. The communication sector which I believe would not be as less sensitive than this sector is 74%. Whatever airline comes, the management will be Indian. Their roots are decided by the ministry. Where they will land, at time they will leave all those controls r there.



Sreenivasan Jain: There has been a historic reservation to this. That’s why it has not happened. Now you are saying the process has begun. Is it possible to try and look at a timeline as to by when this could happen?


Ajit Singh:  I have discussed it with the PM, I have discussed it with the FM, it has been discussed in the group of ministers. So I think.


Sreenivasan Jain: Broadly there is a consensus?


Ajit Singh:  Yes there is so there should not be any problem. There should not be any delay.


Sreenivasan Jain: Kingfisher is saying that were this to be allowed then they may actually be able to bring in some money. Now I don’t know if it’s a logical position to take that you are actually waiting for a policy change in order to be able to bring in investment


Ajit Singh: Listen for anybody to invest money, aviation industry is not an easy and quick decision and giving today's state of their finances, lack of working capital, the loans, I don’t think that’s going to happen in a jiffy, what we r doing now is an enabling legislation. It’s not that that as soon as we do it all the airlines.


Sreenivasan Jain: Instantly the money will not start coming in. that’s then another worry for kingfisher because they have leveraged a lot of their hopes on being able to pull themselves out of this mess by supposedly this decision coming in. but as u r saying it’s not as if overnight the decision is taken and the money starts pouring in.



Ajit Singh: See they have more than 7000 crores loans. Their losses are very high and right now their planes are all on lease.


Sreenivasan Jain: Several of which are being re-possessed


Ajit Singh: Yes so it’s not that they have huge amount left. See air India is in trouble. But if you look at their assets, they have lot of land, buildings, airports, all kinds of assets.


Sreenivasan Jain: Kingfisher on the other hand has far more limited assets. They do have some land and property but essentially what has happened is that because of the crisis they had to pledge lot of the shares from other businesses.


Ajit Singh:  Yes. Mr. Mallya is a well-known businessman. He is a very dynamic man and everybody hoped in government and outside that he will be able to marshal resources and every day it seems to us that it’s not that easy for him.


Sreenivasan Jain:  What about the banks because there is a worry that banks  heavily leveraged or exposed to airlines debt, particularly to kingfisher. They have 10 thousand crore exposure. What happens in that case?


Ajit Singh:  See with several banks kingfisher account is already NPA.


Sreenivasan Jain: Non-performing asset!


Ajit Singh:  Yes. So obviously they get loan under the RBI guidelines. Even if the banks wanted to give money or even if the government wanted to give as u said, under the RBI guidelines, over the international rules, I don’t think they can increase their exposure to this sector.


Sreenivasan Jain: Because they have already declared that kingfisher is non-performing asset.


Ajit Singh: Yes.


Sreenivasan Jain: So even if they want to they can’t do it.


Ajit Singh: Yes. See don’t forget even air India, having agreed to take preferential shares, having cleared the GoM, when the consortium banks met, they refused.


Sreenivasan Jain: But here’s the worry then that if an airline like kingfisher were to go under then what happens to all that debt? How do the banks reclaim it because as u just said kingfisher does not have that same amount of assets? The planes don’t belong to them.


Ajit Singh: That’s a decision that banks have to make. Do they want to throw good money after that or their business plan seems to them that they can recover their money. It’s for the banks to decide and i think they will decide on the basis of the business plan Mr. Mallya has.


Sreenivasan Jain: They could even decide for some kind of strategic takeover of kingfisher, some kind of re-structuring, management restructuring


Ajit Singh: They have 23% ownership also. But the whole point is that if he can’t satisfy DGCA about the security of the operation, about the financial viability of it, all these questions become moot.


Sreenivasan Jain: Overall sir where do you see the aviation sector ahead? You have taken a few decisions during the budget period which are meant to give them some kind of relaxation. One of them is allowing the import of aviation fuel.


Ajit Singh: Our view is that we have taken that measure but it’s not easy to implement. Because first they have to negotiate with the oil companies on their infrastructure, for the pipeline, for the storage


Sreenivasan Jain: At the moment they don’t have that infrastructure to actually grave in without the support of the oil company


Ajit Singh: Yes naturally and they won’t have that infrastructure. It’s not economically viable. So it will take time. Second thing is we want to have declared goods that they don’t have to pay those taxes.


Sreenivasan Jain: This is a technical thing that you need to explain to our viewers that if you declare goods then you only have to pay 4% sales tax on it


Ajit Singh: Yes yes. Otherwise you are charged up to 30%. And we are also calling a meeting of all the aviation secretaries here to point out. See like this Chhattisgarh cut down the sales tax and the flights have increased much more there. So now for economic growth aviation is a vital sector. So states have to consider. Even Maharashtra CM spoke favorably about that. So states will have to consider that if airlines.


Sreenivasan Jain: You can only request the states; you can’t do anything beyond that. What about putting it on the list of declared goods? That’s entirely the Centre’s prerogative?


Ajit Singh: Finance minister has to talk to the states.


Sreenivasan Jain: Because the states are going to lose out on large amount of money.


Ajit Singh:  But the point in our favor is that it has already declared goods for the international flight for Indian airlines as well as foreign airlines.



Sreenivasan Jain: So when you fly international, it’s a declared good


Ajit Singh: So why do we discriminate against domestic flights?


Sreenivasan Jain: This is where considerations come in, the finance minister is negotiating with the states.


Ajit Singh: So we are planning to make the oil minister and the finance minister make all these points and the way, see in march the aviation fuel cost have gone up twice, 5% or more. And in India the aviation fuel costs 45% of the operating cost. Worldwide it is 20-25%. So if we have to make them viable for long term, we have to cut their costs.


Sreenivasan Jain: So in conclusion you are saying that kingfisher which was one time one of our premier airline brilliantly run.


Ajit Singh: Very good service, very good food


Sreenivasan Jain: Yes. And now the situation it’s reached, you say if it comes to that, in the interest of safety, you won’t hesitate to take tough steps regardless of whatever the implications are, you believe that’s too much of a risk to put passengers to.



Ajit Singh: See there can’t be any compromise as far as passenger safety is concerned. There is uncertainty of schedule but they have some flights running now. But if you have to go somewhere will you book a ticket there? You will think twice because you don’t know. See when you are going on a holiday or taking a train journey yes, time is not that much a factor but if you are taking a flight, you have meetings lined up. You have conferences, meetings whatever you are doing there. It’s all planned, and even if the flight is few hours late. It’s not that u missed a flight and can take a second one. Whole business plan for that day or next day is disturbed.


Sreenivasan Jain: On that you are very clear and you are also saying that the perception that the government has actively or behind the scenes intervened to give kingfisher and extension from all its different stakeholders from airports, from fuel companies, from banks and all of that is baseless. That’s not the case.



Ajit Singh: In the interests of the passengers and the employees we will do it for any airline.


Sreenivasan Jain: Thanks for talking as candidly as enough.


7 years ago

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