Kingfisher Airlines gullibility banking on SBI

Coincidence: Joanna Newsom’s Kingfisher song so apt to our subject:

 Whose is the hand that I will hold?
Whose is the face I will see?
Whose is the name that I will call?

India’s Kingfisher Airlines’ bailout saga highlights the sorry state of Indian Businesses and its crony-centric policies. This shows the poor corporate administration, poor regularization, banking inexperience and absolute lack of accountability. Kingfisher Airlines is owned by Vijay Mallya-the self-styled ‘The King of Good Times’ now has his airline flying into bad times.  He also owns United Breweries (UB) a conglomerate, which records annual sales of more than $4 billion a year. The flamboyant Mallya is known for his larger than lifestyle playboy image and he is not ashamed of flaunting it. Many Indians aspire to be like him as he symbolizes the ‘New India’.

So what exactly went wrong with Kingfisher? A general feeling is that he failed to read the bottom line and his irresponsibility cost him the credibility of his airline business itself. With handful of aircraft, Kingfisher went on an aircraft buying spree which was followed by towering fuel costs and price war, which they could not handle.

So can Kingfisher and Vijay Mallya seek a bailout? Are they asking the government to infuse cash so they can fly? Mallya says he wants to keep the airline going and may not ask for any bailout from the government, but he has also not clarified whether he will put in his own considerable funds. Media reports ‘the airline wants more than what it got last year’. To accommodate this demand banks will have to reconstitute’ its debt, which is estimated to be around Rs 7k crore.

The government on its part has cleared its stance and issued a statement ‘Kingfisher Airlines is privately held entity and “cannot” expect any assistance. It will be up to India’s banks to decide whether to rescue IT. “Government is not going to interfere in it,” Banks have to decide on the basis of Kingfisher’s business plan. If they are satisfied with the business plan, they can lend money.”

Talking about Banks deciding on bailout, State Bank of India (SBI) has suddenly jumped into the fray in a bid to save the billionaire’s debt ridden Kingfisher Airlines and its reputation. There is distinctly no economic principle for the State Bank of India to dish out another thousand crore INR package to help them fly. The 19-bank pool, of which the SBI is a part, already raised serious apprehensions about offering further credit to the ailing airline company, since their earlier loans have now been registered as non-performing assets.  The share of SBI has also dropped by over 8 percent on Wednesday.

My question is, in a country where half of the population lives in poverty, is it not strange that SBI is using taxpayer’s money to bail out the ailing Kingfisher Airlines. Is the govt ignorant or feigning ignoranceI? Why are they not forcing Mallya to repay the money that he owes to banks?