Lessons from Kingfisher Airlines debacle

Kingfisher has landed itself in a $2billion soup with the end result of license being cancelled. As the downfall looks imminent, there are lessons to be learnt by the key stakeholders, chiefly the banks and the airlines since it is the former which will take the financial hit and the latter will lose out on a huge potential that Indian aviation market holds for the future. It is ironical that the lowest air fare domestic carriers have taken a lead in the Indian aviation market over the best value airlines that operate the domestic and international routes.

Let us first take banks for what lessons shall they learn. It is quite understandable that the present condition of the airlines has not been like it all of a sudden and that it has been developing for a long time now. There was sufficient time for the banks to have turned off their taps of funding and pressurize the airlines into working with more financial discipline. What made the banks reach this stage? Were the banks expecting too much from the other, cash rich businesses of the Kingfisher owner? By turning a blind eye to the basics of financial management and hoping too much from the other business, the banks led themselves into a comfort zone which was a myth, a bubble which could have been created by the airline management. So, the lesson for the banks is to view each business of an owner as totally distinct from the other.

For the management of the airlines, there are many obvious lessons to be learnt on the front of operational and fiscal prudence. However, the lessons shall also be learnt on being careful not to hit the soft underbelly of trust of the customers and employees on which the turnarounds can still be achieved even if the biggest of financial troubles come up. The recent statements of the top management of Kingfisher on employee attitude do it no good. They were still with the airline for being without salaries for months. Rather, a harsh look at the extravagant ways of management and luxurious facilities to the staff could have been a more prudent step to take. When times are bad, the management turns to operational and financial management by curtailing the flight plans, providing cheap flights and doing many other things and it conveniently forgets the “soft under belly” which forms the basis of any successful turnaround.