If Kingfisher Airlines was a startup, it would still be flying. Here are 5 reasons why.

Photo credit: AIN Online

I applied a cold analyst lens to the Kingfisher Airlines saga and tried to simulate what would have happened if the airline had launched as a ‘startup’ versus a funded ‘corporation’.

This is how it could have played out.

1. VCs (instead of loan sharks) wouldn’t have let the airline go bust.

Check out the shareholding pattern of Kingfisher Airlines. Source credit:Moneycontrol

If Vijay Mallya and promoters own only 8.5 percent of the airline, it’s clear that their equity has settled to the same level of highly diluted high single digit ownership seen in some of the well known, top funded startups (ecommerce, etc). So, owning a large chunky percentage of the business never seemed to be the agenda at all.

If the airline promoters would have ‘diluted’ their equity for dollops of funding versus taking on large debts and institutional money, the airline would have had a chance, because VC money per se cannot be ‘recalled’. Either the venture would have succeeded or failed on its own merit, but definitely not due to the pressure of paying back loans and interest.

Check out the balance sheet that makes this point clear. Source credit: Moneycontrol

2. The airline couldn’t have raised more money if they didn’t deliver minimum viable flights (MVF).

Cash flow of KFA before it blew up. Source credit: Moneycontrol

Focus on the “net cash used from financing activities”. Clearly, Kingfisher Airlines was borrowing loads of money from willing (gullible) banks and financiers who had no clue what was happening to their money, because all they were interested in was getting all of it back with fat interests.

This is the crux of my argument:

A VC would have advanced the first round to the airlines to basically sort out what I would like to call ‘MVF’ – Minimal Viable Flights. Until those flights were optimized to yield in cash or growth (in the hope of cash later like in ecommerce), the next round of cash would not have come!

3. Without checks and balances, there is no control.

4. Why wasn’t the CEO fired?

5. Alignment of interest – VCs versus Shylock