Kingfisher bankrupt but Mr. Mallya's profilgacy perpetuates

The crisis-ridden airline's lot does not seem to ameliorate anytime soon. Its employees have not been paid since May last year. The airline owes money to airport operators, oil companies and other vendors. It's stock has recently plummeted by 11%. The surprising part is that despite being bankrupt, the airline was allowed to fly for so long. The fact is Kingfisher never made any profit ever since its inception. Not even when its rivals were profitable. But inflated egos did not allow Mr Mallya to file for bankruptcy.  Piling burden of debt eventually wreaked havoc. 

Kingfisher's flying license has been cancelled and it has been asked to pay its debt and the outstanding salaries of its employees. Kingfisher is burdened with a loss of Rs 8,000 crore and a debt burden of another over Rs 7,524 crore, a large part of that has not been serviced since January 2012. But nevertheless, even in such dismal times, Mr Mallya donated  gold bricks, weighing about three kg, to a temple at the famous hill shrine of Lord Venkateswara on his 58th birthday. CEO Sanjay Agarwal continues to be one of the highest paid CEOs. In August, Mr Mallya offered 80-kilo gold plated doors to the Kukke Subramanya temple in Karnataka. Most probably he believes that such offerings would make the gods happy and they would pull his company out of the financial crisis. 

India has not been able to bring reforms that can facilitate exit of such businessmen who are not capable of handling the business adroitly. During the early 90s , in the times of license raj , there were very few indigenous companies because getting a license permit was an arduous and herculean task. So the handful of companies that existed received a great deal of protection from the banks. This tradition continues to this day. In the US, creditors can seize a company that defaults on dues, and sell it to a new owner. India too needs similar reforms. Mr Mallya is reportedly on the verge of striking a deal with Abu Dhabi’s Etihad Airways.  Etihad will buy a 48% stake in Kingfisher for $552 million. Etihad's stake in Kingfisher can meliorate the condition and enable it to fly again. But rehabilitating Kingfisher will cost around a billion dollars. And a new airline can be started for maybe just $100 million. No wonder the deal hasn't been closed yet.