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Should Kingfisher be saved?

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While Kingfisher Airlines founder and chairman Vijay Mallya is "working tirelessly" to find new funding to rescue the seven-year-old carrier from collapse, others in India are asking whether Kingfisher is worth saving.

In an op-ed in The Hindu, Raghuvir Srinivasan argues that it's time to concede the airline started in 2005 by liquor baron Mallya, promising low fares yet high service levels to a growing Indian middle class, is a failure.

Mallya has indicated that a foreign airline (or airlines) may be willing to invest money in Kingfisher once the Indian government eases restrictions on foreign airline investment. Be wary, Srinivasan warns those contemplating a stake in Kingfisher: "With accumulated losses of [$1.3 billion], outstanding loans of [$1.4 billion], overdue [payments] to tax authorities, airports and fuel suppliers, and less than half of its fleet flying, Kingfisher does not present a pretty picture for any airline company."

Why go to extremes to save Kingfisher? Because its departure from the market would raise air fares in India. But Srinivasan posits that the Indian airline business is so troubled because carriers charge "abnormally low" fares in a "fatal race to the bottom." Kingfisher is a key player in this game, and it and the broader Indian industry are suffering from severe financial distress.

"Kingfisher's exit could restore some sanity in the industry," Srinivasan writes. "Passengers used to flying at train fares will protest but will eventually have to accept the reality … There appears to be little reason therefore why Kingfisher should be artificially propped up with ventilator support when its vital organs have failed."

Mallya, of course, is a famously wealthy man who theoretically could pump his own money into the flailing airline. "Savvy Mallya would be loathe to push good money after bad," Srinivasan comments. "Indeed, he has reportedly refused to give a personal guarantee sought by banks to refinance the company."

Mallya has been a charismatic figure in the global aviation industry since even before Kingfisher launched in May 2005, telling anyone who would listen that an "emerging new India" promised a growing pool of airline passengers. The airline, selling high-level service from the start, launched with all-new aircraft featuring first-class sections and IFE at every economy seat. But it has never earned an annual profit, unable to cover its costs. It is now on the brink, its survival even through March in doubt.

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