Saturday, November 12, 2011

Kingfisher Airlines on the rocks

Vijay Mallya's Kingfisher Airlines is deep in the red. "Kingfisher Red" has become a self-fulfilling name. This aviation company anxiously awaits the emergence of some kind of a saviour. It is anybody's guess whether there will be corporate amputation or a corporate takeover. Mallya has started identifying external excuses for his self-inflicted misery. He has raised issues like "Should a business be forced to carry on despite loss?" (i.e. does not an airline have the right to cancel flights?) and "Does it make sense for the government to insist on catering to ungainly routes?"

He is a firm believer in "privatising profits and socialising losses". Hence the Civil Aviation minister was requested to come to his succour. Vayalar Ravi in turn sought help from the Finance Minister who turned to the Petroleum Minister. Not one to put up with the game of passing the misplaced buck, Mallya turned to the Prime Minister. The latter wants the ministries concerned to look into the matter. What else can a Prime Minister without authority do? Has it not occurred to Mallya that only the UPA Chairperson can ease him out of the quagmire?

Why is Kingfisher in this predicament? Unlike his father, Vijay Mallya keeps chasing glamour. This strategy does not always make business sense. There is a story (apocryphal?) of the Chairman of a bank who decided after travelling once by Kingfisher Airlines that a company that delights its customers so well cannot fail and thereafter started lending to the Airlines. He had overlooked the caution that excellent customer service is only a necessary, but not sufficient, condition for corporate success.

It will be unwise on the part of the government to pressurise the banks or the oil companies to extend a favourable treatment to an ailing company. That will amount to penalising the tax payers. Mallya should actively look for a buyer. Ego should not stand in the way of common sense.

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