Air India and Kingfisher Airlines (KFA) … can you name two things these two have in common?
They’re both loss-making airlines.
Furthermore, there’s lack of will-power to make them profit-making, from the very top.
The problem with a government job is that you can’t kick the government servant out. The government servant thus enjoys complete job-safety and total lack of accountability. That’s been India’s recipe for ineffectivity and loss-making government institutions for decades. In Air India’s case, add to this massive subsidization by the government. Whenever the Maharaja can’t pay his bills, which is like every month, the government of India chips in with tax-payer money. There’s no real policy being pushed through to effectively earn something. Government servants travel free, big-time. If there’s a shortage of seats, honest, real-money paying citizens are off-loaded and left stranded to accommodate the highly evolved souls that rule our country.
Seriously, why do you still travel Air India? Because it’s cheap? Don’t you see through the tomfoolery? Are you blind? They might wake up upon sensing a complete lack of interest amongst travellers. Until that happens, and until they start performing with no ad-hoc cancellations and off-loading, travellers need to give them that wake-up call by using other airlines and by not subscribing to any money-raising gimmicks or IPOs that the company might come out with.
Cut to KFA. What’s wrong with Mr. Mallya? Unpaid pilots, unpaid fuel bills, unpaid taxes, seriously!?!
Vijay Mallya’s story is not about lack of efficiency. It’s about flamboyance. At the cost of his shareholders? Perhaps.
His liquor business is performing well. A little hand-holding through initial turbulence would have seen KFA through. One pays one’s pilots. Period. You don’t just hire scores of great pilots and buy a huge fleet of aircraft, and then stop paying your pilots. Such flamboyance is going to result in a loss-making enterprise for a few years, isn’t that common-sense? In that period, the hand-holding comes into play from the promoter’s other profit-making enterprises, right? Does that seem to have happened here? Unlikely, looking at the current status of KFA’s balance-sheet. Quarterly losses of 100 million USD and growing coupled with a burgeoning debt, Jesus Christ…
The airline industry involves a very precarious vicious-cycle. If you can avoid falling into it from the start, you are through. Prime example is Indigo Airlines.
The first signs of letting up tighten the noose one more notch. Unpaid pilots result in strikes leading to delays and cancellations. A traveller who has been bitten once decides to travel with the competition. Numbers fall. Now, fuel bills can’t be met. More problems, more delays and cancellations. Finally, you can’t pay your taxes. That’s when the tax department steps in. Headlines go ballistic. Huge bad publicity. Twitter battles. What was that? You want the same mollycoddling as Air India? You want government subsidization? Which world do you live in? Not happening!
Money needs to flow into KFA, not loaned money, but clean money, out of the parent-group’s own coffers. Any usage of KFA revenues to fund the parent-group’s activities is a strict no-no. For example, if the Kingfisher Formula 1 team or the group’s IPL Cricket team were even partly funded by KFA revenues, that would be a huge, huge red flag, given the financial condition of KFA. As of now, shareholders need to see some will-power emanating from the top to control the bleeding. The Street can even short the KFA stock down to zero if the promoter’s attitude does not change. Perhaps such an image-beating would be a wake-up call for the promoter.