The Case of Kingfisher Airlines KFA – Bankruptcy

There is a better way to handle the KFA bankruptcy is to seize all its assets while leaving the liabilities to the existing company & its shareholders.

The assets including landing rights, planes etc along with the staff can be put up for auction in 3 months time to all bidders.

In the meanwhile, the planes can fly as usual under a temporary Government of India appointed management a la Stayam till the auction is completed.

That way public service continues, employees don’t lose their jobs & national assets don’t lie underutilized.

KFA will fetch better value as a going concern. So that is in the interest of KFA’s existing shareholders & debtors as well.

Upon completion of the auction, money received should be used to pay off any fresh capital injected to keep it running.

The balance should be returned to KFA to be used by it to pay off its creditors & shareholders. Any shortfall becomes their loss.

The existing system of handling a bankruptcy is grossly inefficient, results in idle assets and employees and is wasteful of precious cash.

What I have outlined is the standard model for handling bankruptcies the world over. Government of India not to follow it here.

The entity that takes over only the assets of KFA has no liability and is a going concern. It starts with a clean slate.

Our bankruptcy laws require urgent overhaul and modernization. They are a stupidly archaic carryover from English law of the 1930s.

Nationalization is not the intension here where as the Satyam model could be used. It Applied to government because only it has the residual power to do so.

Under existing laws, The government of India has the power to “restructure” any corporate in the “public interest” That is why the suggestion is for government of India and not banks.

The Satyam model means govt sets aside existing management aside, hands effective control to its nominees and keeps the operations going.

Remember Enron US went into liquidation worldwide & yet not single powerplant was shutdown even for a minute except in India.

That’s the difference between the efficiency of US bankruptcy law and ours.

3 thoughts on “The Case of Kingfisher Airlines KFA – Bankruptcy

  1. Leave it to GoI to manage the affairs !! haven’t these guys bled AI and IA. There is nothing to be gained by supporting or propping up unprofitable business particularly if any such gains are going to accrue to the KF shareholders themselves. The shareholders invested and the debtors lent on their own calling. What are these “assets” of landing rights and planes — KF owes huge sums to the airports and surely the planes are secured against debts. Those who do not know how to fly, need not fly.

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