Is Kingfisher a piece of junk?

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Kingfisher Airlines has posted a loss of Rs 755 cr for the third quarter ended 31 December, 2012, even though it did not operate flights during this period. The cash-strapped airline hasn’t paid its staff for over seven months. The airline has never posted a profit in its eight years of operations and has lost over Rs 3,000 cr in the last year alone.

Is there hope for the airline or has it become a piece of junk? Vijay Mallya’s once posh airline is desperate for rescue but has no buyers on the horizon. Mallya himself is staying away from it like plague as the airline has dented his brand significantly. Many had anticipated a string of global big birds to come for easy and cheap prey and get an entry into the Indian aviation space. That didn’t happen and ironically things have to come to a situation that Mallya alone can resuscitate the carrier or it’s the end of it. “Whatever assets it has will likely be carved up and any leased jets will be returned to lessors and the airline will cease to look like an airline. It has already been grounded and lost its operating license – there really isn’t a fat lot left of it to even call it an airline,” says Saj Ahmed of London based Strategic Aero Research.

“It’s cheaper to start a new airline than restart KFA,” says Kapil Kaul, CEO of Centre for Asia Pac Aviation. The aviation industry wants to see Mallya spend his own money towards recapitalising the airline. “He could have stepped in earlier with his own money, rather than wait for a third party to invest – which to date has still failed to materialise,” says Ahmed. According to experts $600 million or more will be required to put KFA back into the air even as regulatory authorities are willing to renew the license if Mallya can show up with $200 million for starters.

“There is no sale happening,” says a banker who has worked on potential deals for the now defunct airline. Having taken many foreign carrier reps to the ministry, he asserts, “Even the aviation ministry is not urging investors to take up the KFA case.”

So why aren’t investors coming in? For many reasons. One, it ‘s not an operating airline and buyers have the option of better-run SpiceJet, Go or even Jet Airways that are wiling to sell stage. Two, the massive debt of Rs 15,000 crore is hanging like a Damocles’ sword. Employee morale is low, many human resource linked issues are stuck in court cases and the pilot base too has shrunk.

In recent trouble, state-run Airports Authority of India (AAI) said it will not go by the “empty promises” of the airline management and insisted on being paid up for its dues. At this rate if the planes keep standing at airports, the quality of aircraft will come under question. “I just find it difficult to see a situation where that airline can ever fly again,” says Ahmed.

What can Vijay Mallya do with his airline? “There could be some value in the brand, license too can be worth a lot since the government has put a freeze on fresh airlines licenses for now,” says Kaul.

Kingfisher has remained grounded since October 1 and its flying licence expired on December 31.