It is an airline that has repeatedly cancelled flights and downsized operations, offering a total of 70 flights a day now (or till Sunday, given that on Monday it suspended all operations till 4 October) as compared to 570 at its peak in 2008, and flying a mere 10 planes as against 78 back then.
It is also an airline that hasn’t paid employees since April, forcing some of them to leave and some others to disrupt work as they did on Sunday and Monday.
So, why is India’s aviation ministry keen to keep Kingfisher Airlines afloat?
And why are Indian banks, many of them state-owned, continuing to display the same leniency to the airline, which owes banks a total of around Rs8,000 crore, showing the same spirit they exhibited in 2010 when they converted part of their debt into equity in the airline at a conversion price of Rs64.48 a share (the shares were trading at Rs39.80 then)?
The popular answer to this is that the airline’s chairman Vijay Mallya carries influence in political circles. While that may be true to some extent (after all, the move to allow foreign airlines to invest in local ones happened at his behest), the very fact that he has not been able to get the tax department to unfreeze the airline’s accounts, which have been frozen over a tax dispute, shows that Mallya may not be as influential as most people would like to believe.
It is possible that a misguided sense of honour and morality is behind the government’s efforts. After all, if it can throw good money after bad in an effort to revive the ailing state-owned airline Air India, then, isn’t it morally obliged to help any private airline that finds itself in trouble?
It is also possible that the government wants to keep Kingfisher afloat in a desire to keep air tariffs low although this objective may not be realized because Kingfisher keeps cancelling flights. Meanwhile, other airlines have increased their tariffs.
Finally, it is possible that the government is simply worried that Kingfisher is too big to fail, at least in terms of the amount it owes banks and the number of people it employs. This is in keeping with India’s track record of not allowing businesses to go under (the current regulatory environment doesn’t easily allow bankruptcy or liquidation proceedings).
This could explain why the ministry of civil aviation has consistently backed the airline and refused to scrap its licence, despite several lapses.
