The Airline game, as exposed by Sh Veeresh Malik
(A company is a person created by law.
This basic fact also is not known to most of the population. That is, the promoters (owners) also can not take its money into their pocket. They can only earn prescribed salaries, and whatever dividends they earn on their shares.
Enter Mr corruption. The promoters start stealing from the Company, through a hundred different ways, shell companies being the most popular. That is what Raju of Satyam did, that is what almost every promoter in India does. Because in India, wrongdoers are never punished. Or were never punished till Modi came along. Modi has shut down so many corruption pipelines, that is why Lootian mafia is so desperate.-Ed)
Now read the Airline game:
#Copied from the Facebook post of Sh Veeresh Malik
I learnt the airline game from a gent during my youth as a shipbroker who used to specialise in the airline game then.
Why do airlines in India go bust repeatedly? (Note – specific references are not intended because this appears to happen cyclically)
1) Airline gets licence to operate only after huge “effort” etcetc. It is assumed that the licence has a decent nett worth to atleast start an airline, offices, staff, setting up expenses and the rest of it.
2) Airline then starts either buying new/used aircraft or leasing new/used aircraft. These are usually accompanied with training packages, again, on credit linked to aircraft purchase
3) Seller’s or leasing credit is available from manufacturer or leasing company which should be more than enough. These are conditions available globally.
4) Other expenses that an airline has on day-to-day basis are on anything from 30 to 180 days credit.
5) Airline tickets are receipts up front, often months in advance. Cargo does not move unless payment for freight is received in advance. All other income streams are on advance payment.
Now go back to the buyback/leasing games. In brief.
Interesting leasing companies operating from suitcases or from behind closed doors get involved in the mark-up game. The airline will “sell” it’s aircraft back to a leasing company at a lower price and then lease it back from the same leasing company at an inflated price.
To add to the fun and games, the airline then goes to the helpful desi bank, and takes a loan. Or takes many loans.
The money now coming from everywhere is used to –
a) pay the inflated lease rentals for an airplane that is growing older every day.
b) play games in real estate, diamonds, bullion, jewelry, and more.
c) The syphon back to the licencing process, ofcourse, is like royalty that needs to be constantly paid.
Operating the airline becomes secondary.
Now comes the really interesting part.
As word spreads with the employees that the airline is busy playing multiple frauds on itself, the employees also start playing their own little games, mainly because it is so brilliantly complicated to reconcile accounts when all sorts of cash and mileage games are also going on.
When the whole game goes belly up, the aircraft don’t even belong to the airline anymore, the vendors are left unpaid, employees are like deer frozen before bright headlamps and the banks see their auditors and management resigning.
It’s very interesting tracking where some of the bought/leased bought again/leased again aircraft go not by call-signs but by manufacturer’s serial numbers.
Very briefly, it’s like buying a car for 10 lakhs, selling it back for 8 lakhs, paying 30k a month for leasing it, and then after a year, buying it back for 10 lakhs, and then doing the same 30k a month again.
Do the maths.
Into this comes the new “danda” from this Government, especially on the auditors. And the banks.
Bankers become coy, auditors resign, and audit committee members start getting tough.
These right wing ‘orrible ‘indoos have finished this game too!
(It’s not a coincidence that the troubles of this airline are co-terminus with the total end of the “diamond” game.)