Business » Companies

Updated: February 22, 2012 14:30 IST

The rise and fall of a castle in the air

K Giriprakash
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NOT WELL-GROUNDED: The sign at a closed Kingfisher Airlines booking counter at Mumbai airport tells a bigger story.
NOT WELL-GROUNDED: The sign at a closed Kingfisher Airlines booking counter at Mumbai airport tells a bigger story.

How an airline obsession put a liquor baron on the rocks

Never has the flamboyant Vijay Mallya been in such a tight corner before.

He took over the UB Group even before he turned 30 after his father, Vittal Mallya, passed away suddenly in 1983. Since then, he has consolidated the group holdings, shed those companies, including a car battery making venture, which didn't make sense to his business, won a corporate battle — and a war of words — with the pugnacious Manu Chabbria, wresting from him Shaw Wallace, once among the top companies in the liquor industry. Today, his beer business controls half the domestic market while the liquor business controls three-fourths of the market.

But as the saying goes, the quickest way to become a millionaire is for a billionaire to invest in the airline sector.

Kingfisher Airlines was set up in 2003 but hasn't seen a single year of profit since it got listed in 2006. Today, accumulated losses stand at about Rs 8,200 crore and the money to pay for fuel, salaries and airport fees is running out, prompting Mallya to approach the government for a bailout.

The company blames the government for its predicament — the high cost of aviation fuel, the requirement to service non-profitable routes — with a top UB Group official telling The Hindu that the politicians running the country should decide whether they want the transport sector to be robust or are happy enough with “continuing the bullock cart age.”

But market analysts believe flaws in Mallya's business plans and style of functioning lie at the root of Kingfisher airlines' woes.

In a controversial report on the airline, Veritas Investment Research analysts point out that Mallya should have never got into the airline business. “We believe that the ill-conceived foray into the airline business has already cost UB shareholders dearly, and that their ownership of India's premier liquor and beer assets has been sacrificed at the altar of egoistic ambitions,” two analysts with the research company said in a report in September this year. The report was hotly contested by the UB Group management which felt there was nothing wrong with the airline.

The problem, of course, lay in acquisitive excess. For Mallya, there was no ducking the temptation of getting into the airline sector. For one, there was the glamour, something he couldn't get enough of despite the yachts and islands. In time, the airline became a stepping stone for the pursuit of other adventures.

He acquired Whyte & Mackay, a Scottish bulk liquor maker amidst drama and glamour, holding a press conference in London to announce the deal. He bought newspapers (Asian Age was one such), fashion and movie magazines, bought and sold a TV company and added football teams to his ever expanding empire. He even added a cricket team to his list of acquisitions and called it Royal Challengers. Someone who was known for his distaste for politicians, he actually funded a party and became a Rajya Sabha MP as well.

The acquisitions wouldn't just stop there. He went on to own a racing team (Force India) which regularly competes in Formula One racing events, launched a calendar named after his brand, Kingfisher, in which the best of the models fell over each other to feature. He held New Year parties at his famed Goan palatial bungalow.

Of course, the biggest venture of them all was Kingfisher Airlines and because he was the big daddy of the glamour world, he promised flyers a class of service not usually seen among the domestic airlines. Jet Airways was good and on time, but was for busy executives; Air Deccan was for the aam aadmi, a sort of shuttle service, while the others either didn't matter or were too small.

Mallya didn't disappoint. He brought glamour into the business of running airlines. Each seat in his aircraft had a TV screen just like the international air carriers offered welcoming guests by appearing on the screen and asking them to write to him personally if they were unhappy with any service. He handpicked air hostesses, gave away goody bags to each passenger and the welcome at the airport counters had to be seen to be believed. He made you feel special. The corporate sector wanted all top executives to fly Kingfisher and they came back admiring the service.

Three key mistakes

It was when the good times seemed to last forever that Mallya made his first strategic mistake. Deccan Aviation's Capt G.R. Gopinath, who was desperately looking for a buyer for his airline, Air Deccan, had all but tied up with the Anil Ambani for a sell-out. Some last-minute delays eventually led to the collapse of the deal. That's when Mallya, who kept denying that he couldn't even think of buying an airline whose business model was different than his own, suddenly put in his bid, apparently offering more money than the previous one to clinch the deal.

It seemed a good deal in the beginning. Mallya got Air Deccan's huge market share and several aircraft as well, plus an immediate listing. Thrown in was another goody: the licence to fly on international routes as Air Deccan had been in the business for five years — a requirement by the regulator for any airline to fly overseas. But he also acquired the losses incurred by the airline.

Through a reverse merger, Kingfisher Airlines became Air Deccan and once the entire acquisition was completed with necessary approvals from the regulator SEBI in place, Mallya quickly changed the airline's name back to Kingfisher Airlines in 2008.

He spun off Air Deccan's fleet into a subsidiary called Kingfisher Red. So, Kingfisher Airlines had an economy as well as business class and flew on trunk routes including the metros, while Red did the rounds of tier-II cities' as well as some of the bigger cities. It was picture perfect.

It wasn't, actually. Mallya was not just into one business but several and each as different as the other. Normally, for such diverse businesses, one would appoint a CEO each to run it with a hands-on approach who would, in turn, report to the group chairman.

While the liquor and the beer businesses had an experienced set of officials running the show, the others needed the undivided attention of Mallya himself. More so for the airline venture. This was where his second mistake came in. The airline had everything going for itself: great brand visibility, loyal customers and a wide network. But as a former business partner of Mallya pointed out recently, he was more like an absentee landlord.

Mallya was seen everywhere and apparently took more than necessary interest in running the airline but it wasn't just good enough. The business model was coming apart and losses kept mounting. There was cannabalisation from the mother brand. “If two brands look alike, then obviously, passengers will opt for the cheaper priced,” the former partner, who did not want to be identified, said.

Industry analysts say the third mistake was that the airline should have first consolidated its domestic operations and then introduced international routes because on the foreign routes, the competition only gets bigger and with those who have deeper pockets.

Looking for a soft landing

The airline is today saddled with total debts of over Rs. 6,000 crore. Mallya was forced to take loans from banks which now have a total exposure of about Rs. 7,000 crore to Kingfisher Airlines, of which over Rs 1,300 crore had been converted into equity during the last fiscal as part of a debt restructuring exercise. Of the banks' total exposure, over Rs. 4,000 crore are in the form of term loans. The consortium, led by banking behemoth State Bank of India, also includes a number of other public and private banks.

But early this year, after the airline missed one of the milestones to raise Rs. 1,000 crore through global depository receipts because of the crisis in the Arab world, the lenders converted part of their loans to equity at a premium to market price. As a consequence, these banks now hold 23 per cent stake in the airline.

These loans for Kingfisher have also come at an enormous cost for the UB group. More than nine out of 10 shares of its crown jewel, United Spirits have been pledged as collateral to the banks.

Awash in liabilities, Kingfisher Airlines is today asking the banks for another debt recast and perhaps some easier terms to pay interest costs. What remains to be seen is whether the banks will agree this time because they are under extreme pressure not to do so. The government's view on the matter is, of course, the most important factor.

But in a recent interview to Business Line, UB Group chief financial officer Ravi Nedungadi pointed out that when the first debt recast happened, the price of crude was about $80 per barrel, which has now gone up to $100 per barrel while the rupee has eased past Rs. 50 per dollar from about Rs. 40 earlier. “It is obvious that the working capital requirements too has gone up,” says Nedungadi.

In its bid to reduce costs, the airline has started cancelling flights and has recently closed down its low-cost carrier Kingfisher Red which, according to one analyst, might prove to be another costly mistake. “Indian passengers are extremely price conscious and this measure may just lead the airline into a deeper mess,” he said.

The ‘king of good times' may just have to abdicate his throne some time soon if he wants to stay in business. It isn't always that you can pull off every business venture in your life time. Scotch on the rocks works. Kingfisher on the rocks doesn't.

Kingfisher airlines was set up with a business model for 'UP Market',
now some analysts and other high profile executives from aviation
industry says that there is mistake in Mallya's business model, well i
dont think that there is any flaw in business model, the only problem
which i see is that Mr. Mallya had embarked on many projects at same
time which consumed all his resources, had Mallya only looked for
domestic market might have proved to be success, even though indian
market is price sensitive consumers are ready to pay a little bit
extra if they are given comfort and style.

from:  vijay singh shekhawat
Posted on: Feb 22, 2012 at 04:25 IST

This is the one of the best articles, I ever read...In future this story will become a case study in Univeristies.....

from:  Rajesh.A
Posted on: Jan 9, 2012 at 17:28 IST

I started a grocery shop a year back.
I am facing losses now.

Can i also ask for a bail out from the government?

from:  Shreshth
Posted on: Dec 1, 2011 at 02:13 IST

Government is finding hard to Help its own AirIndia, How can
KingFisher's Bailout be possible??

from:  Mohith Krishna.
Posted on: Nov 17, 2011 at 19:43 IST

Very informative article

from:  janani
Posted on: Nov 15, 2011 at 17:33 IST

Very well written !! Summed up everything .

from:  Shashank
Posted on: Nov 15, 2011 at 17:02 IST

Heard about `castles in the air`.Kingfisher trully represents the adage.Are there any more in the pipeline wherein govt.can give bail-out package? This will definitely help small,medium bussinessmen as well as retail shopkeepers to approach their respective ask for bail-out package because after all it will be for their survival of individual's life with their own tax paid money given to Govt. Really, well studied article which has opened world's eye how the Mally's bussiness empire is being run.

from:  K.Kamat.
Posted on: Nov 14, 2011 at 15:55 IST

The airline business as never been consistently profitable anywhere. There is however one attraction. That is the kickback that you receive when you place bulk orders for new aircraft. That kickback of course does not get reflected in the balance sheet of the company. In the past national airlines used to be justified for their airlift capabilities in times of emergency. That contingency has now become less with specialist aircraft with large lift capability available with the air force. If Kingfisher goes it will be a kind of an illustration of Joseph Schumpeter's 'creative destruction'.

from:  Hilary Pais
Posted on: Nov 14, 2011 at 15:19 IST

Success always made a man arrogant.Mallya got easy success as he is heir of liquor boron.There is tremendous profit in liquor industry.This easy success made him so arrogant,he think himself king Midas He is over confident touch any thing must become gold This illusion bringing his downfall.Government must not help him.Let him become bankrupt than only he learn the lesson what the price of arrogant

from:  Ramesh Raghuvanshi
Posted on: Nov 14, 2011 at 10:40 IST

That our banks converted loans to KF to equity, speaks volumes of their business accumen.

from:  Hilary Pais
Posted on: Nov 14, 2011 at 10:27 IST

I really loved this one, "Scotch on the rocks works. Kingfisher on the
rocks doesn't."

from:  himanshu mittal
Posted on: Nov 14, 2011 at 10:17 IST

I really don't understand, why government of India and Banks should help Malya? Is it a duty of the government to bail out a businessmen? Ordinary people borrow small loan from banks and with all difficulty they try to clear it, but most of the big business houses never think that they have to pay back to bank. Today more than 90 percent of uncleared outstanding loans from banks are from big business houses!! I have traveled several times with this airlines. I never thought that it was a borrowed luxury and we know the borrowed luxury is only an illusion!!

from:  C S Sundaresha
Posted on: Nov 14, 2011 at 07:33 IST

excellent exposition of " THE RISE AND FALL OF KING FISHER " Manmohanji must not fish in whirlpools at the poormans expense .

from:  capt.m.s rajan
Posted on: Nov 14, 2011 at 00:24 IST

this is an awesome article which gave me an inside look which i was trying to find out about Kingfisher Airlines..

from:  Amit Broka
Posted on: Nov 13, 2011 at 23:42 IST

Great Analytical article by Mr Giriprakash.Keep it up The Hindu

from:  Sundar
Posted on: Nov 13, 2011 at 23:42 IST

I am a regular investor in the stock market in the last 25 years and never touched any of the airline stock till now. I dont know on what basis our banks converted the loan into equity with such high premium however I am not questioning their wisdom of granting the loan. After knowing that Mallya is entering airline business I sold all the shares of the company in his fold. Mallya's decisions are many times based on other than business calculation. He wants to be always associated with glamour and he would go to extent to achieve that. He was the first one in the Indian airline industry to announce the acquisition of A380 without any business justification and after realising that he is not making enough money cancelled the same. I hope he would have learnt the way of running prudent business for which he has paid heavy price and cost.

from:  Sivakumar
Posted on: Nov 13, 2011 at 23:36 IST

Government should not bail out Kingfisher. It rather should come to the
rescue of Air India which is really struggling to even pay the salaries
to its employees. Kingfisher is run by a man whose lavish lifestyle is
there for all to see. Probably he can sell off those yachts and islands
and resorts he owns to revive Kingfisher Airline. But how can our banks
can lend a loan of Rs. 4000 crore to a company which never made profits
since its inception?

from:  Nikhil
Posted on: Nov 13, 2011 at 21:08 IST

Atlast, there is one voice from the private sector who has stood up and told what the present Prime Minister of India should have said. Mr. Rahul Bajaj did not mince words when he said that inefficient private sector companies will have to die and the Government should not throw tax-payers money.
Secondly, why the bankers converted the loan into equiry AT A PREMIUM a few years back ? The current market price is one-third of the rate at which a part of the loan was converted into equity? Where is the accountability? Whether it is from the treasury of the Government OR the depositors' money of a public sector bank (even private sector bank), it is public money.
Prime Minister should re-think.

from:  vc sekar
Posted on: Nov 13, 2011 at 20:37 IST

It was such an informative, yet interesting, article. The analysis is so
engaging! Excellent piece, sir.

from:  Hemant Gairola
Posted on: Nov 13, 2011 at 19:58 IST

Very well-wriiten article based on hard facts. It can be summarised in one sentence. 'Vijay Mallya had no business to enter airlines business'. Further, all these years Mallya has proved that he has lot of style in various fields of business but no substance. It is rather shocking that the P.M. is even hinting of trying to rescue the mismanaged company. Let him concentrate on government's big white elephant namely Air India.

from:  S.Sarangan
Posted on: Nov 13, 2011 at 19:22 IST

A lot of interesting comments, but this one caught my eye-

"Indian government led by Manmohan singh is already presiding over
huge scandals like 2G, Commonwealth, etc although Sonia/Rahul seems to
have taken some action. In KingFisher case they should put their feet
down ruthlessly and stand aside and let the markets do the job.
from: monae"

Mr or Ms Monae- LMAO! You think that the Indian PM is actually leading
the govt and is responsible for its actions? What do you mean by Sonia
/ Rahul seems to have taken some action? THEY ARE the rulers by remote
/ proxy, you sir / madam make a passionate plea for how the markets
should handle it, and we should do the right thing, but you follow it
by saying, Sonia and Rahul should put their foot down...

May I ask you, WHO ARE THEY CONSTITUTIONALLY to do that? They have
ZERO power constitutionally, but in reality they seem to have all the
power with zero responsibility which is always a bad sign of things.

from:  Suds
Posted on: Nov 13, 2011 at 19:13 IST

This article is absorbing and informative. My blood boils after reading the article and the comments. I suffered humiliation at the nationalized banks while trying to get loans for my children (educational and housing). The support by several banks and the present Govt to this particular business group is very sickening.

from:  chandrasekar
Posted on: Nov 13, 2011 at 16:59 IST

One wonders how this always happens. If it is assumed successful businessmen are differentiated (from Common man) because of their level of success, one wonders what “Due diligence" means when an airline supported by an Army of Financial Wizards & Institutions, take off on a self destructing flight like this? How can one digest the fact that an airline which has not seen any profit right from take-off is kept flying for 8 years? Is this the same when some common retail investors who have had failed investments, keep holding to it with Hope against Hope?

from:  V.MAHESH
Posted on: Nov 13, 2011 at 16:58 IST

Vijay Mallya should learn lessons of business from marwari Businessman not to tangle in entertainments and gambles.Marwaris never gambles.They work like work horses.They were pure businessman.They never gets into such busienss of lavishness and opulence.If they have money they utilise in charities and philanthropy.But mallya has seen huge moeny in liquor business which chaged his life style.His son is a playboy.His wife is living separately.He is meddling with many socialites.It is a case of writing your own destruction by your own hands.

Posted on: Nov 13, 2011 at 16:49 IST

Quality work from Giriprakash, he summed it aptly.

from:  raghu
Posted on: Nov 13, 2011 at 16:41 IST

i have taken a loan 4 house,which i am paying regularly like a sincere
citizen of this country.however due 2 recent interest hike by banks i am
feeling a pinch,will govt bail me out.if not why mallya.

from:  NP
Posted on: Nov 13, 2011 at 16:15 IST

Well put words from not so neutral stand point. Nevertheless, the egotistical approach in Mr. Mallya's decision is quite evident otherwise. But, given the GOI's lethargic approach to elevate transport sector IMHO I don't think they will be even considering bailing out KA. If nothing comes out of it, I am sure that the Baabu's won't even sleep in that direction. What this actually does is hurt the country's image in the global scenario. Mr. Mallya's is surely a very resourceful man and I sure he will pull a rabbit out of the Baabu's cap this time.

from:  Varun Pai
Posted on: Nov 13, 2011 at 15:52 IST

Thanks for this well researched and well written article. Hope the government does not
declare a bailout package and in order that it doesn't one needs to generate informed public

from:  Swati Vaidya
Posted on: Nov 13, 2011 at 15:35 IST

The software industry pays astronomical salaries to is employees and the employees blessed with huge disposable income flies down to their parents' home in distant cities and towns on weekends without batting an eyelid. Airlines business thus flourishes. These cash-rich employees ask for and get cheap loans from banks to buy large apartments at very high cost and equip these apartments with everything money can buy, again leveraged by bank loans. DGP surges forward and the Prime Minister pats himself on the back.Well,this is the internal dynamics of our economic growth. Does this dynamics of growth appear robust and reliable to anybody? Isn't the Manmohan Singh brand of economic growth, like a reality show, unrealistic? We will be get an answer to this question at great cost to the ordinary people in the country.

from:  K.Vijayakumar
Posted on: Nov 13, 2011 at 15:23 IST

Very well written-concise and factual.
Yes, Indian economy does seem to be faltering!

from:  harish
Posted on: Nov 13, 2011 at 15:22 IST

A marvelous article. Clear and informative. Just very precise and interesting.

from:  Asit vashistha
Posted on: Nov 13, 2011 at 13:49 IST

The Indian Government gave blank cheque to rescue Air India which never had a chance of making profit while King Fischer was flying the Indian flag uniformly praised all over the world for its excellent service. The Government should step in save this prestigious airlines

from:  b.sugavanam
Posted on: Nov 13, 2011 at 13:33 IST

Whatever people say, Kingfisher was a great airline. Whenever my wife
and infant travelled alone, this was the only airline I chose (even if a
few hundreds costlier it was) because they took care. The only mistake
Mr. Mallya did was to introduce this kind of an airline in our country.
As, though hard to digest but a fact, we do not wish to "pay" for a
service, and run behind the cheapest option available.

from:  Logi
Posted on: Nov 13, 2011 at 13:27 IST

Mallya should have read Harold Robbins before starting his business. To grow to fast is to invite disastor. What happened to Pan Am is another disastor. Kingfisher was an example to airlines like the American airline was, but the moment he took over Deccan we all knew he would take the plunge. This he has.

from:  Paddy Singh
Posted on: Nov 13, 2011 at 13:27 IST

I completely corroborate with Mr. Jacob's Point --- "Funding from Banks for perennially loss making companies, while the promoters’ stake was a paltry sum of Rs 300 cr". This is unscrupulous & requires the Finance Ministry to reprimand the key lead committee members of the Banking consortium rather than a bail-out, so called "Soft-landing". As truly elucidated above by Mr. Bangaraju, Mallyas are not common men & they have sufficient resources to sustain with their life-style; Let them self-finance their bail-out by selling/pledging their resorts & other personal assets (which I am sure would accumulate to the tune of atleast Rs.10,000 crores) - I mean including their networth on foreign soils ...

from:  Guhan
Posted on: Nov 13, 2011 at 12:33 IST

How many more Mallyas are in town? I am amazed that banks such as SBI have been abundantly gracious to fuel this motor mouth's greed. Hope the government of today don't bail them out. These sort of outfits based on incorrigible business models (if one did exist!) should be let to die. That would set an example for those dodgy Maddoffs, Guptas etc out there!

from:  PM
Posted on: Nov 13, 2011 at 12:14 IST

But none can beat our DGCA. Kingfisher curtails flights and Indigo and Spicejet loses slots. India is a wonderful land.

from:  raghavan
Posted on: Nov 13, 2011 at 12:06 IST

False Flag for ushering in FDI in Indian carriers.

from:  Sadasivan
Posted on: Nov 13, 2011 at 11:47 IST

Mallya destroyed Air Deccan & Indian Aviation. Now it has destroyed him.

from:  Sandeep
Posted on: Nov 13, 2011 at 11:30 IST

Very well written article. Enjoyed reading it ! Can someone please forward this article
to Mr. Mallya himself ? Retrospection helps !

from:  Vijay Elango
Posted on: Nov 13, 2011 at 11:13 IST

Whatever has happened is unfortunate but one thing is for sure that Kingfisher must not be bailed out. It would be a wrong precedent for whole industry esp. in a capitalist economy like ours. Writer should have explored the reasons why other airlines are not in such a mess and it would have been better if the facts above were backed by data.

from:  Kamal
Posted on: Nov 13, 2011 at 11:10 IST

While so many airlines are operating and the roads are chocked with motor cars and motorcycles, the bulk of the people of India are continuing in "the bullock cart age". But who cares for them? Certaintly not our Prime Minister who sheds tears for Kingfisher airlines, while he has no soothing words for the bulk of our people who are suffering because of the huge rise in prices of essential commodities. The most important aim of a government should be to ensure high standard and quality of life for all people in the country. In a market economy the businesses should take care of themselves and it is not the government's job to put those businesses that fail due to mismanagement back on rail using government's money that belongs to every man, woman and child in the country. By the way, government's funds are not exclusively that of the tax payers as is generally said and believed since the money with the government belongs to everyone including the children who are born this instant.

from:  K.Vijayakumar
Posted on: Nov 13, 2011 at 11:08 IST

Mallya's business and ethical sense can be seen from one single incident - When he brought over MRPL in Mangalore from Government, he wanted to close it down, and turn it into a hotel(for promoting Kingfisher Calendar type of glamor perhaps?), ignoring the fact that the plant was providing livelihoods to thousands of people from nearby places. Protests forced him to cancel the plan; it was decided that the plant would be run by the employees' group there. Its making good profits now. And Mallya wanted to close it down. Perhaps Gandhi was right when he said that greed and lust kill.

from:  Ritesh
Posted on: Nov 13, 2011 at 10:57 IST

Excellent piece of analysis,to read,on a Sunday morning. Capt.Gopinath endeared himself to several middle class (new)air travelers,when he came up with a low cost airline.We also remember the uncharitable remarks about the low cost airline,that came from the "castle".It was some where in 1980 or so I remember an article in The Economic Times,where the strength of Late Vittal Mallya (in building up an Empire)lied in his ability to judge the projected profitability of a sick unit by analysing the company's Balance Sheet,before a buy out.Let us wish his (Play) "Boy",good luck coupled with wisdom,in the interest of investors/Bankers in his Empire.

from:  Kandasamy Koomarasamy
Posted on: Nov 13, 2011 at 10:36 IST

The PM has not ruled out a bail out package to Kingfisher. If that happens, it'll be one more instance of bad financial management by the Govt. Already, the tax payer's money is being wasted in bailing out Air India. The railways which has crying need for modernization is ignored. The power sector is struggling for coal linkages. These issues are not on the Govt's priority list. It is India's image as a new corporate icon which is more important. Common man's basic needs and welfare? Oh, they can wait. After all, our people are used to tough living conditions for ages.

from:  R Srinivasan
Posted on: Nov 13, 2011 at 10:25 IST

For the couple of years the economy is in turbulance and top business leaders and political bosses are finding it difficult to manage since the uncertainty seems formidable. So no amount of past experience and expertise seems to be sufficient to manage. Anyway good luck to Kingfischer.

from:  Venky K
Posted on: Nov 13, 2011 at 10:17 IST

If he had stuck to his brewery business, he would have continued to make money. He wanted limelight - calendars, airlines, Force1, cricket team. Why should the govt bail out and create a bad precedent?

from:  Geekay
Posted on: Nov 13, 2011 at 09:40 IST

All those lavish F1 parties and IPL parties are coming back to haunt Dr. Mallya it seems. But that said, I have enormous respect for Dr. Mallya. Maybe he was styling himself in the mould of Richard Branson and in trying to do so ignored the market where he belongs to. Also Dr Mallya has shown that a global model can be replicated at the domestic level albeit with proper cost control measures.

from:  Shamit
Posted on: Nov 13, 2011 at 09:36 IST

A pampered businessman; see the theatrical behaviour of the airlines. Even in its adversity, it is questioning the very basis on which his company has been licensed to operate. See also the dithering of the government in dealing with the Air India for four years now with no hope of recovery in sight. People have not forgotten another airliens in the private sector which also resorted to similar theatrical gimmicks in sacking a large number of tis staff just to attract government attention and soon after it achieved results, the airlines said that on the call of the conscience of its CEO, it is reversing the sack order!

from:  S Subramanyan
Posted on: Nov 13, 2011 at 08:47 IST

All the ministers have a share in jet airways and kingfisher....while Air India employees are not being paid for the last 4 to 5 it not suspicious that the PM is talking about helping these private airlines at taxpayers cost...we still don't know who the owner or jet airways is.

from:  Jay
Posted on: Nov 13, 2011 at 08:14 IST

In addition to an accumulated loss of Rs 8200 cr, and a few thousands of crores of fuel& other bills o/s, the company has a commitment of Rs 22000 cr on orders placed for 71 aircrafts. Against all these the promoters' stake in the equity was only Rs 300 cr as of March 2011! A couple of questions: 1. How do the public sector banks sanction loans of the order of Rs 4000 cr and give bank guarantees/comfort letters to the tune of Rs 22000 cr for sick and perennially loss making companies, while the promoters’ stake was a paltry sum of Rs 300 cr? Shouldn’t there be a high level inquiry into the manner in which the loans were sanctioned? 2. Why should the PM give hopes of bailing out King Fisher at the expense of tax payers’ money and thereby set a precedent for other embattled companies? Isn’t it a clear case of good money chasing the bad?

from:  C S Jacob
Posted on: Nov 13, 2011 at 06:56 IST

Kingfisher Airlines was a loser from day one because it had a simplistic business model - based on wine and women - both handpicked by a CEO whose fuel is unadulterated glamour. After Veritas exposed Kingfisher, the government should have at least woken up. State Bank was stupid to lend to Kingfisher when the writing was on the wall all along. Instead of bailing out the airline, throw out the CEO with his "handpicked" airhostesses. Let Capt Gopinath or Naresh Goyal take over.

from:  M S Prabhakar
Posted on: Nov 13, 2011 at 06:49 IST

Didn't Vijay Mallya run Binnys Chennai to the ground and a thousand wage earners to poverty? if it is so then the curse of the hungry will haunt. What a fine man Vital Mallya was when he greeted visitors in his office at Hoechst Pharmaceuticals. I hope I am not mistaken

from:  ceeoren
Posted on: Nov 13, 2011 at 06:34 IST

Vijay Mallya has had a bitter pill to swallow in his foray into the airlines sector. It is a clear case of improper benefit segmentation of the market. He should perhaps read Leo Tolstoy's story "How much land does a man need?". Airlines is not all glamour and comfort. It is hard economics requiring micro efforts to keep the costs to the bare minimum. Aping the foreign airlines modes has spelt doom for many of the Indian airlines brands. It is not too late to embark on a restructuring exercise cutting out all frills and put hand picked professionals who are experts in managing companies successfully in India where profit margins are under constant pressure. Vijay Mallya should have seen the warning signals much earlier instead of allowing matters to drift hoping for heavenly manna to fall from the skies. Enough examples of collapse of airlines are available the world over as case studies. At the end of the day it is glaringly obvious it is the public money down the drain.

from:  R.Vijaykumar
Posted on: Nov 13, 2011 at 06:29 IST

He deserves this position.He should have concentrated on one or two businesses. To satisfy his ROYAL EGO&to be treated like a great celebrity, he &his son were showing off much in Cricket fields &Grounds. Now he wants Govt. help for soft loans. Soft Loans are for weaker sections not for such ROYAL personalities. We strongly feel that Govt. should not waste common people's money for such egoistic fellows. He is having other Assets like resorts in South Africa &such Assets including his own Liquor Assets. Let him divert his own funds &try to live simply;This should be a lesson for all such families.

from:  Bangaraju
Posted on: Nov 13, 2011 at 06:11 IST

Well written story. The failure of the airlines is a good example for an indepth analysis by MBA students.

from:  Subramaniam Krishnan
Posted on: Nov 13, 2011 at 06:04 IST

The greed for more wealth, more power and more fame would never fail to bring the downfall of these kinds of tycoons. How this airline could make a profit while selling cheap tickets, giving away freebies and even headsets on a short 30 min flights? First of all does India need more airlines when the major airlines in India and other countries are running in huge losses? The government should not bail out this self-wrecked airlines. One more thing . Is this flamboyant tycoon's business empire serving the poor people of India? I wonder.

from:  Ken Sundaram
Posted on: Nov 13, 2011 at 05:05 IST

Great writing but could be more succinct !!

from:  Adam Hansford
Posted on: Nov 13, 2011 at 04:17 IST

In my view, Mr. Mallya has never been very successful in an industry with level playing field. Aviation, Motor racing and IPL are examples. His only star is beer and liquor business which he runs almost as a monopoly in most states. It would be very interesting to see if he can survive when a level playing field is put in place in the liquor business in India.

from:  Gopal
Posted on: Nov 13, 2011 at 04:13 IST

Bailing out KingFisher will be a criminal act and government of Manmohan singh should stand aside. There was no business for UB to be in airline. But Mallaya stood in front of bangalore declared "The world is big, but I am big-gge-er" America bailed out all banks, insurance companies, hedge funds and he result is that american middle class is pummeled and tottering on edge of poverty.
Indian government led by Manmohan singh is already presiding over huge scandals like 2G, Commonwealth, etc although Sonia/Rahul seems to have taken some action. In KingFisher case they should put their feet down ruthlessly and stand aside and let the markets do the job.

from:  monae
Posted on: Nov 13, 2011 at 04:04 IST

Thanks Mr. Giriprakash, for an informative article tinged with a good pinch of humour. Look forward to reading more of you articles!

from:  Sam
Posted on: Nov 13, 2011 at 03:29 IST

Vijay Malya is ofcourse a man to be admired for his growth but the recent flaws in his Business tactics led him to this position as we all know. i would suggest him to FIRE OFF his Financial advisor's and the chief advisors. it was their responsibility to identify or forecast the "may so" happens to Malya prior to any action he had taken. we cant completely blame Malya for all these recent drippings as im sure he might have just signing of the deals and papers..

from:  Nadeem
Posted on: Nov 13, 2011 at 02:35 IST

True indeed.You can't have all the things at the same time.

from:  Shivani Srivastava
Posted on: Nov 13, 2011 at 02:00 IST

The situation of every field in India is looking similar to the US situation just before the great Wall Street crash of 1929. First Kingfisher , then KG basin scam will swallow the Bigger(and fatter) Ambani. The Smaller Ambani is already embroiled in the 2G Scam and as the trial has now begun, the ADAG people in Tihar will blow the whistle on the Younger Ambani.Then the IPL scam ( outcome and spot fixing) will come out when Lalit Modi or some one else blows the Whistle. Even the IT sector which is heavily dependent on US and Europe will have experienced a drought where its contracts are concerned... as the local public pressures in the West rise.
Overall, the situation seems bleak for Indian economy. Also the wages of people have not risen at all, while the prices have been increased by crony capitalists leading to low sales ( of homes especially ) . Chaos is mounting. And if this bubble bursts , India's prospects are truly frightening. Besides its not an aberration, its real

from:  Rohan Maduskar
Posted on: Nov 13, 2011 at 02:00 IST

Government should never ever get involved in bailing out businesses that were not thought out properly. Once government helps one company, others will start looking for the same kind of help. It will be an endless process. I am not sure why even Air India is existing? Government should get out of the business of running airlines. It has enough problems to contend with.

from:  Srini
Posted on: Nov 13, 2011 at 01:59 IST

It seems to be a case like Satyam Computers. On one hand 9 out of 10 shares of crown jewel United Spirits are stated to have been pledged. In addition probably huge funds by way of loan etc. would have been transferred from associate concerns like United Breweries. Money channelised from banks and sister concerns could not be used efficiently. The shares of all United Breweries group have taken a beating. Mr.Mallaya remain more busy with glamour rather than business and expect the banks to take hit.

from:  Anand Mohan
Posted on: Nov 13, 2011 at 01:26 IST

This is surprise that PM of AAM ADAMI Man Mohan Singh has not taken much interest in the case of Govt.airlines as much he looks interested in Kingfisher. So now Vijay Mallya need not to worry about money, our Govt.has huge money can be manage.

from:  Rakesh
Posted on: Nov 13, 2011 at 00:36 IST

I give the man the credit for having the courage to launch an exiting new airline back in the day. But his flamboyant attitude does not bode well for a business venture.

UB should focus on its core competency rather trying to put a foot in every other industry. Conglomerates can be successful only if there is decentralization of power.

from:  Arun
Posted on: Nov 13, 2011 at 00:12 IST

Never read such an informative article written in an immensely neutral way. Awesome article !!!!

from:  Amit Si
Posted on: Nov 13, 2011 at 00:02 IST

Why must the Government rescue the Big companies? Are we a capitalist society or a socialist. Now the politicians will be looking for their pound of flesh!

from:  Shah Rukh Khan
Posted on: Nov 12, 2011 at 23:49 IST
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