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
Never has the flamboyant Vijay Mallya been in such a tight corner before.
He took over the UB Group even before he turned 30 after his father, Vittal Mallya, passed away suddenly in 1983. Since then, he has consolidated the group holdings, shed those companies, including a car battery making venture, which didn't make sense to his business, won a corporate battle — and a war of words — with the pugnacious Manu Chabbria, wresting from him Shaw Wallace, once among the top companies in the liquor industry. Today, his beer business controls half the domestic market while the liquor business controls three-fourths of the market.
But as the saying goes, the quickest way to become a millionaire is for a billionaire to invest in the airline sector.
The problem, of course, lay in acquisitive excess. For Mallya, there was no ducking the temptation of getting into the airline sector. For one, there was the glamour, something he couldn't get enough of despite the yachts and islands. In time, the airline became a stepping stone for the pursuit of other adventures.
He acquired Whyte & Mackay, a Scottish bulk liquor maker amidst drama and glamour, holding a press conference in London to announce the deal. He bought newspapers (Asian Age was one such), fashion and movie magazines, bought and sold a TV company and added football teams to his ever expanding empire. He even added a cricket team to his list of acquisitions and called it Royal Challengers. Someone who was known for his distaste for politicians, he actually funded a party and became a Rajya Sabha MP as well.
The acquisitions wouldn't just stop there. He went on to own a racing team (Force India) which regularly competes in Formula One racing events, launched a calendar named after his brand, Kingfisher, in which the best of the models fell over each other to feature. He held New Year parties at his famed Goan palatial bungalow.
Of course, the biggest venture of them all was Kingfisher Airlines and because he was the big daddy of the glamour world, he promised flyers a class of service not usually seen among the domestic airlines. Jet Airways was good and on time, but was for busy executives; Air Deccan was for the aam aadmi, a sort of shuttle service, while the others either didn't matter or were too small.
K Giriprakash in The Hindu. Here
