The last few weeks have seen several long-running F1-related sagas slipping out of the spotlight, but that does not mean that the problems have gone away. The first is the question of whether Formula 1 should go to Bahrain; the second is about the funding of Force India. I should say straight away that Force India is not the only F1 team to have question marks about its money supply. Teams will always sound confident if you ask them about cash, but a handful of the current crop need/could use more than they currently have. This is why cost-cutting remains a priority, as burning money – in what amounts to an arms race of irrelevant technology – is really not the intelligent answer in the current economic climate. However, as this is a question of business, rather than sport, and there are some teams who can afford whatever is needed, the teams cannot agree on how to set sensible budget caps.
The situation at Force India is worrying in that it is a team with no visible means of support. It has been funded by Vijay Mallya’s various companies for the last few years, and has made significant losses, which have meant that he has been forced to seek assistance from elsewhere. Officially Subrata Roy Sahara is supposed to be bringing $100 million to the team in the next three years, in exchange for a percentage of the shares, but whether this is real money or virtual money (which is what Mallya seems to trade with) remains to be seen. Sahara and/or Mallya need money to pay bills in order for the team to have the freedom to do the job. This they have done very well in recent times, but the worry is that Mallya’s credit seems to have run out in his other businesses and no-one really understands what it is that Sahara does that earns him the kind of money that he seems willing to invest in Mallya’s businesses, despite them being anything but solid.
Late last year, the Toronto-based research group Veritas questioned Mallya’s accounting practices with Kingfisher Airlines, the way in which Mallya does business, the support he seems to be getting from the Indian government and concluded that “we do not believe that Kingfisher’s antics would have found any takers in a responsible credit market and that the airline would have been liquidated by now.” That may sound harsh, but one can see how that conclusion has been reached. It is impossible to say exactly how much money Kingfisher owes but there are secured loans of around $2.5 billion and perhaps the same kind of figure in unsecured loans, debts and tax arrears.
India’s Directorate General of Civil Aviation (DGCA) has warned Kingfisher that “a reasonable case exists for withdrawal of their airline operator permit (licence) as their financial stress is likely to impinge on safety”and issued a stern warning to the airline to take immediate action to resolve the lapses. The airline has been in trouble paying salaries, plane leases, fuel bills, interest on its debts, not to mention taxes and has been scaling back its operations rapidly, while the government (keen to avoid the embarrassment of a collapse) has been quietly helping out, changing the law to allow foreign carriers to buy up to 49 percent of the shares of its domestic operators. India is one of the world’s fastest growing markets in terms of passenger traffic, but the airlines lose money with every passenger. It is hoped that a large international company such as British Airways might use the opportunity (and its expertise) to get control of the business and then turn it around. This is all well and good, but is not going to mean money going into the F1 team. That will save Mallya’s face but is unlikely to feed his F1 habit.
I have touched on the question of Bahrain a few times and the signs are that this will once again become an issue for the F1 world as the opposition (no matter how small it may be) will be trying to use the planned Grand Prix in April as an opportunity to draw international attention to its complaints. The Bahrain government is working hard on its international PR and seems to be trying to win over hearts and minds amongst moderate Bahrainis with reforms, but what it cannot do is change what has happened in the past. The opposition is working hard to stir up trouble and the government has no choice but to react and this leads to renewed claims of government violence. The race is an obvious target for such activities, and was used for this purpose long before the current problems really began. It is naive to suggest that going ahead with the race will be possible without such a reaction. At the same time one can see the problem that the authorities have got themselves into. This week there are major problems being reported with the national airline Gulf Air, which has been hit by falling passenger numbers. It is scaling down its operations and hoping for government money to keep it afloat. One can feel a little sorry for the moderates in the government as they are trapped because of the radical actions taken last year. It may be that Bahrain cannot get rid of its extremists until there is a regime change, but even then there are no guarantees that the extremists will stop. They do not seem to be very interested in coming to the table to negotiate, despite claiming that all they want is peace. Be that as it may, this should not be Formula 1′s problem. F1 is a powerful marketing tool and a formidable money-making business, but it is only a game and the FIA has rules that should remove the sport from such troubles. The FIA Statutes state that the federation “shall refrain from manifesting racial, political or religious discrimination in the course of its activities and from taking any action in this respect”.
I do not want to see the Bahrain GP disappear from the F1 calendar, but at the same time the country is what it is and it must deal with its problems, and F1 should not be getting involved in trying to be part of a programme of national salvation. One can argue that there are abuses everywhere in the world and F1 still goes to these places, which is true, but it is not the point. In Bahrain the F1 race has been politicised, in most other places it has not. And where it is a political issue (such as in Melbourne) there are parliamentary debates rather than tear gas grenades versus Molotov cocktails.
The global economy remains troubled and increasingly that is filtering through F1′s buffer zones and beginning to have an effect on the sport’s money supply. Now, more than ever, the teams should be united and working towards a common goal, rather than quibbling over whether the team with the red hats should have more power than the guys in the grey hats.
