Lesson # 33 : Can Mr. Mallya save his dying Bird?

Mr. Mallya when Kingfisher was the king of good times

Having read a fabulous article in Forbes this week it really got me thinking. Can Kingfisher airlines officially the country's smallest air carrier survive. With both it's wings cut and capital in shortfall coupled with the tremendous pressure from it's investors and lenders can this bird sail through the wild storm it's gotten itself into or it will it just end up a dead bird like that albatross in rhyme of the ancient mariner.

So what's the problem? Well no one sums it up better than Forbes. Click here for the link But here's just a summary

Problem # 1 : There are debts of over 7000 crore to various lenders from National to private banks to various airport authorities across the country to other private investors who want their money back and they want it now.

Problem # 2 : Kingfisher still has over 4500 employees who they cannot fire at this point of time as they will have to compensate them which they cannot afford. Moreover none of these employees can quit because they still need to be paid six months dues and leaving the job will affect their pension funds.

Problem # 3: If Kingfisher sells all it's assets, If Vijay Mallya sells all his assets, If Siddharth Mallya sells all his assets they still can't repay the debt.

Problem # 4 : FDI in aviation for which Mallya has been lobbying isn't been given a green signal for the simple reason that other aviation companies feel that the sick players in the market should be allowed to die if they cannot afford the medicine.

Problem # 5 : No other aviation company has the required effort or money to invest in Kingfisher. The one's that do such as GoAir and Emirates wish to steer away from this sick and nearly dead bird.

So how should Mallya the King of Good Times set his boat sailing again?

The simple answer would be to cut costs. But Kingfisher has already done that significantly. The fact of the matter is that a greater number of employees are a burden to the company. So cutting costs of employees and any other  unused employee would be beneficial. This would mean paying significant amounts but over the course of the next five to ten years the rewards would be enormous. Kingfisher can start a new policy whereby it would lay off employees right now paying their dues and other benefits the ones it can afford and offer it's employees the chance to join the firm back when it re expands it's operations in the near future for the same benefits and the same salary.

Once this cost cutting measure has been undertaken then Kingfisher should get it's planes running. A lot of them need immediate maintenance which Mr. Mallya has ignored for long. Assuming that a greater amount of the fleet is operational Kingfisher should choose to either sell a part of its fleet to pay back it's lenders and keep just a fleet of let's say seven planes initially. Once the capital from the planes comes in it should be used to pay back lenders or the company can also choose to buy back it's shares from the public. The latter being a big gamble which may off in the long run. Once the planes are operational Kingfisher should follow the Go air model of keeping it Simple. The company should operate low cost flights to highly dense cities nationally. It should cease international operations on the whole. Using it's planes it should start flights which need to be at a discounted rate of 10-15% from competitors. These flights should be operational from Delhi to Mumbai or other cities which see dense frequent flyers.

At the same time Kingfisher should also start with cargo services from Delhi to Mumbai or other flights offering air cargo at cheaper rates than competitors. Or it should simply team up with other logistic companies and offer them cheaper air cargo or simply better deals than competitors.

Apart from this Kingfisher should use it's planes for private charter pricing it similarly below the average market rate but at the same time not letting go of providing the world class service.

Once Kingfisher starts to churn out and atleast generate suitable revenue and pay it's employees that is it starts to break even the bird is ready to fly.

Obviously a large number of these propositions seem preposterous and mad on the first read. But it's so crazy that it just might work. And besides what has Kingfisher to lose? Hasn't it lost enough already?

Perhaps one day the bird shall fly again!!

And there's this song perhaps Mr. Mallya would be singing this right now. Click here

-Doodle