Save Kingfisher; Dump Mallya: Swaminathan S. Anklesaria Aiyar

Kingfisher Airlines is deep in the red. Should the government organize its rescue? When millions of small businesses are allowed to go bust when banks cut off credit to thousands of smaller defaulters, rescuing Kingfisher will smack of crony capitalism.

The airline has defenders too. Kingfisher has justly earned a reputation for excellent service standards. Quality is always worth preserving. We need to save Kingfisher without saving Mallya.

Its main competitor in quality, Jet Airlines, has frequently made good profits, while Kingfisher never has.

Kingfisher has already been rescued. Banks converted unpaid loans to Kingfisher into equity at a very favourable premium of 62% to the ruling market price, a tribute to Mallya’s political clout rather than company’s future prospects . Even after that the company has sunk deeper into the red. Even after being restructured and slashed, its debts exceed Rs 7,000 crore. Government concessions to the industry may save other airlines, but not Kingfisher.

A failed management must be changed. That’s normal in a market economy.

If Mallya really wants yet another chance, he must be told to bring in at least Rs 3,000 crore of fresh equity. If he cannot entice the investing public—which is probable--he must sell his other assets. Apart from liquor company UB Holdings, he owns stakes in the cricket team Royal Challengers, Bangalore; the Kolkata football teams Mohun Bagan and East Bengal; and the Formula 1 team Force India. In many other countries his bankers would force him to sell these.

If Mallya will not sacrifice his other assets for Kingfisher , then he cannot ask others to sacrifice their financial interests for him. His creditors should acquire the company and auction it.

Swaminathan S. Anklesaria Aiyar in The Times of India. Here and Here