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Wednesday, July 30, 2014

spice jet, not that spicy

If you run a bad business no amount of smartness can do any better due to the inherent qualities of the business. Yet, people don't care. The result?



How much income have these businesses generated for the capital providers? Or should I rephrase that question to why do people invest in a bad business?

A not-so-smart investor would have made 70% over the last five years and about 179% over the last ten years, while the airlines gave nothing but pains to the stakeholders. 

Spice Jet is in trouble; King Fisher is already in trouble; and Jet Airways is looking at losses and debts. We already know about Air India and Indian Airlines, but don't have information about the other airlines which are not publicly traded, but here is the picture: 


What are these airlines doing, building castles in the air? These businesses require tons of money on a regular basis, yet don't earn enough on that capital. If you are in a bad business, you generally can't help it, or help yourself. What a business it has been - large capital, losses; more capital, more losses - a global airline phenomenon.

Today, Spicejet is available at Rs.7.50 b; Kingfisher at Rs.2.50 b; and Jet Airways at Rs.28 b; Any takers?

Who is learning? Not many, we guess. Is that pride and status, or hubris?

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