Kingfisher Airlines

Force India: How the tower of cards could collapse

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Over the past few days I’ve been asked many times and seen people enquiring on various F1 websites as to how much is an F1 team worth. Of course the answer is simple, different teams are worth vastly different amounts. An F1 team is a business venture – registered with a legal identity independent of any rich owner and subject to the business regulations from the statutory authority where they are registered.

 Valuing a business

The way business ventures are valued is highly complex and sector/performance specific. There was old 3 times profit rule that was a fundamental when I studied Finance many years ago. Yet even this most simplistic valuation methodology is fraught with danger when you dig deeper. Is that profit before or after asset depreciation, asset goodwill, taxation, one off accounting entries of substance – I could go on..and on..and on…

I guess my favourite methodology which can be proved beyond doubt and its an old adage, which says “The value of something is best measured by how much someone is actually prepared to.”

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Korea GP review: Alonso and Kobayashi know the game is up. More poor marshalling ruins the race

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The rather limp wristed waft of the chequered flag by Psy, of “Gangnam Style” fame, probably encapsulated the event that was the 2012 Korean GP.

The headlines are, Vettel takes the lead in driver’s WDC from Alonso for the first time since Valencia, and Red Bull extend their lead in the constructors’ table, with Ferrari significantly overtaking McLaren for 2nd place.

Marshalling ruins another race

As I suggested following Singapore, the marshalling of the event had a significant impact today and  robbed us of what could have been a very exciting race. How it took until lap 10 to move Nico Rosberg’s Mercedes is beyond me, particularly when considering where it was. Races with high tyre wear are often fascinating in strategy and can produce exciting finishes. By lap 2 when the DRS was available, the cars were still tightly bunched any number of drivers may have been able to have a go at Vettel and a number of position interchanges would have occurred.

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Mallya lives in opulence whilst unpaid staff starve and commit suicide

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Thejudge13 reported last week that a family member of Kingfisher airlines staff was reported to have committed suicide due to financial ruin by Indian police (link)

Vijay Mallya’s Kingfisher airlines have been grounded now for 2 weeks and are on the brink of financial ruin: “The Economic Times” (click on search, put in “Kingfisher” and you’ll see a number of articles over the past few months), Police said last week that the wife of an employee who had not been paid since March committed suicide last week due to the stress of financial ruin. Before the Japanese GP staff were demonstrating as they had not been paid for months and this lead to violent confrontation.

Airline start up

The history of airline start up’s in the past 50 years is littered with failure. Around 9/10 fail owing hundreds of millions of dollars. The problem is not in the early days, as the entrepreneur identifies a few profitable routes, invests about 50% required and gets the project off the ground. Where the issues begin is when they wish to expand. Due to initial success they find financial backers prepared to put up vast sums of money for their expansion.

Each route they take on is incrementally less profitable and it only takes a dip in trade for a short time for them to struggle to generate enough cash to pay the interest on the loans. In the case of Kingfisher airlines they owe $billions.

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