In total, Kingfisher has accumulated losses of about Rs 6,000 crore. It has not paid employees’ salaries for months and has defaulted on tax payments and vendor bills. Even the airline’s lessors have taken back a number of planes because the company had reportedly defaulted on lease rentals. Its operations have reduced dramatically as it is flying less than 20 aircraft and its market share has crashed. It’s only rescue option is the foreign direct investment in Indian aviation, which is taking a long time for approval. Further, to stabilize its financial burden, Kingfisher is seeking loans from banks and other financial institutions.
The reason why banks are still trying to humour him relates to the collateral he has pledged: shares of parts of his liquor business. The vultures are descending not on his airline, but his pledged shares: his cash-generating liquor businesses. There is a good chance that whoever is now lending money to Mallya is buying not the airline – which is anyway a dead duck – but his liquor business.”
In a September 2011 report on Kingfisher Airlines, Canadian investment research firm Veritas had stated that both the airline and Mallya’s holding company UB Holdings (UBH) were effectively insolvent and that the two were at the mercy of Indian financial institutions.
Analysts have time and again said that the UB Group minus Kingfisher Airlines could well benefit the company’s cash cows. But the fact remains that in its efforts to support Kingfisher, the group pledged the shares of other group businesses such as United Spirits and now faces the risk of losing his only profitable business too— all thanks to his unexplained love for the airline.
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