Saving Kingfisher

Last Tuesday, Vijay Mallya, the chairman of Kingfisher Airlines tried to put up a brave face, saying that he had come up with a plan to turn around his troubled airline, reeling under heavy debt and interest payments. Could his plan be something that is too little and perhaps too late?
Mallya says he doesn’t want a bailout and is only seeking more working capital to tide over a crisis that has its origins in higher oil prices, high interest costs and rupee depreciation. Meanwhile, he’s trying to extract Rs 1,000 crore lying with lessors as security if banks agree to offer him letters of credit. This can help the airline cut interest burden by repaying some high-cost rupee loans.
This crisis-ridden airline has also sought government permission to directly import fuel, and is withdrawing from loss-making routes as part of its plans to reconfigure the aircraft. And, of course, it is discarding its low-fare service, Kingfisher Red, and will fly only as a full-service airline for higher yields. Mallya is also willing to divest his stake and rope in a partner.
These could be the equivalent of putting out a raging brushfire with a wet towel, and experts say is yet another indication of how inept a thinker Mallya is, about the airline business.‘‘It is an unbelievable act of incompetence to wait until vendors cut off your credit forcing you to cancel flights before you address the problem in your airline. It is a big joke and unfortunately those who will suffer the most are Kingfisher’s employees who will be the real victims of an incompetent boss and his gang of "yes" men,’’ says an airline expert.
In 2005, when Mallya launched Kingfisher, he had the advantage of starting on a clean slate, with no legacy costs. In his quest for market share and market dominance, Mallya tried to play the same game that many say he did in the liquor business where he gobbled up distilleries and rivals. Here, Mallya snapped up loss-making Air Deccan in 2007. While Deccan helped Kingfisher boost its airport slots and allowed Mallya’s airline to scale up and grab 20 per cent market share, the surge in oil prices and over-capacity in 2008 clobbered the airline.
22/11/11 Ranju Sarkar/Business Standard

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Categories: Kingfisher Nov 2011