What happens to a business that requires tons of money on a regular basis, and does not earn enough on that capital? It loses that money!
Moreover, if that business continues for long it eventually fails. Isn't this simple enough to understand? The more capital it receives the longer it operates, and the longer it operates the more it loses that capital.
If that is the case why should that business continue? Kingfisher Airlines owes truck loads of money to various stakeholders, viz. employees, suppliers and lenders. There is one problem though: it does not have cash to pay them. It also owes big time to its shareholders is another matter.
Those stakeholders have only two choices: Ask for the full amount owed which is not possible or accept a big write-off and restructure the amount. That's like something is better than nothing for them. That hope that they will get something someday will keep them. But will they?
The company has never earned before; market share has gone way down; costs will build up. More capital will be required, and more often. Who will supply the capital now - promoters and related parties? The shareholders of the airline have already lost their money. Now if the shareholders of the related parties start funding a deteriorating business..well, it will be a bold move.
Then there are some others who can supply: the FDI. Will they? Why?
More than anything it is a bad business to be in. Leaking boats can be replaced with another boat. But what if it is not a good idea to be in any boat?
Airline is that boat; it is one such business.
Moreover, if that business continues for long it eventually fails. Isn't this simple enough to understand? The more capital it receives the longer it operates, and the longer it operates the more it loses that capital.
If that is the case why should that business continue? Kingfisher Airlines owes truck loads of money to various stakeholders, viz. employees, suppliers and lenders. There is one problem though: it does not have cash to pay them. It also owes big time to its shareholders is another matter.
Those stakeholders have only two choices: Ask for the full amount owed which is not possible or accept a big write-off and restructure the amount. That's like something is better than nothing for them. That hope that they will get something someday will keep them. But will they?
The company has never earned before; market share has gone way down; costs will build up. More capital will be required, and more often. Who will supply the capital now - promoters and related parties? The shareholders of the airline have already lost their money. Now if the shareholders of the related parties start funding a deteriorating business..well, it will be a bold move.
Then there are some others who can supply: the FDI. Will they? Why?
More than anything it is a bad business to be in. Leaking boats can be replaced with another boat. But what if it is not a good idea to be in any boat?
Airline is that boat; it is one such business.
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