Airlines need to extend cooperation with other carriers in business. But should they decide to choose or act in the manner of ‘survival of the fittest’, God save the rest!
SpiceJet's low offer of fare rate at Re1, with conditions attached, met a negative response from the Director General of Civil Aviation (DGCA), before others could even think of jumping into the band wagon and quoting similar rate. Of course, the lucky punters who booked their tickets at this ridiculous rate would still be able to enjoy this rate which is lower than the bus fare even in the remotest village in India!
Moneylife has had the opportunity to cover the stories of the domestic carriers who have been indulging in price wars, while all the time there was the spoke of huge burden of interest payments on their capital purchases and the heavy losses that they were incurring, year after year. If what they claim is true, why in the world should they commit suicide by offering uneconomic rates which presumably do not cover their break-even points?
It may be recalled that these carriers had tried their very best to prevent Air Asia getting the licence to operate. Obviously, they were so engrossed in attacking the Air Asia entry; they forgot the quiet welcome that Air Costa received, particularly in Andhra Pradesh, where it began to operate. Based in Vijayawada, Air Costa now services, with just four Embraer jets (from Brazil) cities like Ahmedabad, Bangalore, Chennai, Hyderabad, Jaipur and, of course, Vijayawada, which is its hub. In the last few days, Air Costa quietly added three more destinations like Coimbatore, Madurai and Vishakhapatnam in their flight plans.
According to Ramesh Lingamaneni, executive director of Air Costa, their plans involve acquiring four jets every year, and extend their plans to include other two and three tier cities and towns, while making an application for an all-India permit by the end of this year. They would prefer to be known as a well-knit regional operator and serve the customers.
Tony Fernandez, the global CEO of Air Asia had lamented on the pitiable action of the domestic carriers who had ganged up together and submitted petitions to DGCA to prevent the issue of licence to Air Asia. Although no official announcement has been made as to when this low-fare carrier will take off, it looks as though they are well set to start their operations in the next to six to eight weeks, at best.
Air Asia's flight paths and destinations to cover the Southern Region have not yet been announced; but it is certain that their plans positively include much better service and even cheaper rates than the low prices offered by Spice Jet, Jet Air, IndiGo etc. It has been reported in the press that Air Asia will offer upto 30% cheaper rates than these loss making carriers. They plan to avoid the expensive ports like Mumbai and Delhi but may stop over at Kolkata considering their proximity to their HQ in Kuala Lumpur!
Any guesses for the Southern cities they may cover? Our own predictions would cover Bangalore, Coimbatore, Cochin, Calicut, Goa, Madurai, Mangalore, Puducherry, Tanjore, Thiruvananthapuram,Trichy and Tuticorin, with Chennai as the hub!
We strongly believe that Air Asia would extend the hand of cooperation to live and let live with other carriers in business, but should they decide to choose or act in the manner of "survival of the fittest", God save the rest! Our own feeling is that Air Costa would do well to join forces with Air Asia to make customers in the South happy with timely service at competitive rates, where the customer is treated as king!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Sports is an area, which experiences continuous flow of money from different sources and has been able to survive and grow even during times of difficulties. No wonder cash rich sports like football, tennis, cricket and boxing are most susceptible for money laundering
Money launderers keep on finding new avenues to launder money. Whatever be the means of launder money, it is very obvious that money laundering is done in those areas where flow of money is large, frequent and not so well defined. One of the most susceptible areas for money laundering activity has been sports. This is one such area, which experiences continuous flow of money from different sources and has been able to survive and grow even during times of difficulties. Some of the sports which have seen huge money flow are football, tennis, cricket, boxing etc.
Financial Action Task Force (FATF) analysis of sports as a target avenue for money laundering gets manifested in the following statement , “Sports that could be vulnerable to money laundering problems are either big sports (worldwide like football or on a national basis like cricket, basketball or ice hockey), sports like boxing, kick boxing and wrestling (sports that have traditionally links with the criminal milieu because of the relationship between crime and violence), high value sports (such as horse and car racing where there are ample opportunities to launder big sums of money), sports using (high value) transfer of players, sports where there is much cash around, which give criminals opportunities to turn cash into non-cash assets or to convert small into large bills”.
While many sports are vulnerable to money laundering, nothing can beat football in money laundering activities. Some recent international experiences show how money laundering has become home for money laundering. Carson Yeung Ka-sing, a Hong Kong tycoon and owner of British soccer club Birmingham City, was jailed in March for six years on charges of laundering HK$721 million ($93 million). Similarly in Bucharest, Romania a court handed prison sentences to eight Romanian football officials for tax evasion and money laundering in connection with the transfer of 12 players. There was a loss of 1.7 million Euros to the state because of the activities related to money laundering and tax evasion.
So what makes football such a fertile avenue for money laundering? The first and the most important aspect is, of course, huge flow of money that this sport gets every year. Some interesting data point in this regard provides evidence to this. During 2011-12, the European football market grew to €19.4 billion (up 11%), of which the ‘big five’ leagues had a market share of 48% (€9.3 billion). In particular, the top end of the game showed resilience in the face of wider economic challenges in Europe.
Top division clubs’ revenues in 2011-12
As per a study done by Deloitte, “In 2011-12 the total revenues of the 92 clubs in the top four divisions of English football exceeded £3 billion for the first time. Within the Premier League total of £2,360m for 2011/12, Premier League clubs’ revenues ranged from £320m (Manchester United) to £53m (Wigan Athletic). There were six Premier League clubs with revenue above the average (£118m), including the four clubs that competed in the UEFA Champions League in 2011/12. Champions League football generated at least £30m extra revenue per club, and around £70m for Chelsea who won the competition”.
All data points above show that there is a huge inflow of money in football making which it a fertile ground for money laundering.
While money indeed plays an important role in promoting money laundering in football, it is not just the only factor. There are some other interesting factors, which contribute in making football vulnerable to money laundering which can be described as follows:
As per FATF, an investment in a football club can provide the criminal, the “favoured status”. “In most cases investments in football clubs are characterised by a high degree of uncertainty over future results. However there are strong non-material rewards for wealthy individuals who invest in football clubs or players,” it added.
While efforts are on at the global level to reduce instances of money laundering in football, it won’t be incorrect to say that there is huge amount of money, which has been laundered into the sector. In the days to come, more instances of money laundering may come out in open in this sport.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
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