KINGFISHER AIRLINES: MALLYA’S NEXT CASUALTY

Vijay Mallya inherited an alcoholic beverage business empire from his father Vithal Mallya in 1984. Consequent to his takeover of UB group as its chairman, he established several new business units;  UB Petrochemicals, UB Engineering, Aventis Pharma, Kingfisher airlines to name a few, apart from acquiring many well known Indian companies namely, Kissan, Managlore Chemicals and Fertilizers, McDowell and a host of offshore companies. Investments poured in to all his business ventures, till recently, through Public and private funding and investments, as investors, fund houses and banks had reposed great faith in his abilities and exuberance.

Regrettably, he never reciprocated earnestly to any of the investors, financial institutions and shareholders in his group companies due to gross mismanagement and draining funds from majority of his group companies for building a sham and deceptive public image for himself and his brands through profligate non-revenue expenditure, penchant for flamboyant lifestyle, extravagant events associated with his ventures coupled with his prejudice towards his rival business units and/or brands and his penchant to wipe them out through shrewd acquisition and business practices.

Kingfisher Airlines has come in to existence with an assurance from Vijay Mallya, as a dependable alternative to Indian Airlines, in 2005. He promised unparalleled levels of service, comfort, and convenience to all the guests flying on his airlines. During 2007, when the King fisher’s operations are at its nascent phase, he acquired Air Deccan, the first low cost airline, which revolutionised the air travel industry by reaching out to the middle class Indian citizen. The media and his rivals in Industry at that time, alleged the motive behind the acquisition, was to kill the low cost airline business in India.

However, Vijay Mallya despite consolidating his aviation business, went for acquisition of large number of new aircrafts through debt route and equity dilution from circa 66% to 50%. Despite charging a hefty premium on passenger fares over the other airlines, King Fisher airlines accumulated a loss of over Rs 6,000 crore till date apart from an accumulated debt of Rs 7,057 crore. Interestingly, all his liquor business deals namely, Whyte and Mackay acquisition etc., which are supposedly, highly profitable and niche businesses are funded and managed by foreign banks, while as highly competitive and non-profitable business from the UB group are funded and managed by several India’s premier public sector banks, incuding, State Bank of India, IDBI bank and Punjab National Bank. The public sector banks owned by Indian Citizen either directly (Public share holding) or indirectly (Indian government Share holding) has funded the airlines to an extent of Rs. 3000 Crores. It is anyone’s guess as to what the Banks are up to, when they confront with bad and non-recoverable debts; WRITE-OFF.

Furthermore, the Airlines management stopped paying salaries to its employees, dues to its vendors, dues to the oil companies for ATF, dues to the Airport Authority of India, service tax dues etc. The 40 bank accounts of the King Fisher airlines have been frozen by the government authorities and the airlines have been cash strapped for its day to day expenses. Subsequently, the airlines have been operating only 16 of its 64 aircrafts since last month and have quit Kolkata and Hyderabad routes completely. It has also wound up international operations in mid March. Vijay Mallya and his team have failed miserably to stick to a carefully drafted recovery plan.

Agonisingly, Vijay Mallya was in the denial mode until the late stages of the crisis. However, of late and true to his nature, he has again been falsely assuring Civil Aviation ministry, DGCA and other agencies of reviving the airlines and nurturing it back to health.

The most pertinent question that arises given the huge financial liabilities, loss of good will among its customers, shareholders and investors, Airlines Management’s lack of commitment as well as poor attitude and disastrous recovery plan: Is Airlines businesses in India, so profitable, to turn around a company with so much financial liability, nevertheless with Vijay Mallya at its helm?

Government has been threatening to cancel the 7-year-old King fisher Airlines' licence if safety norms, passenger convenience, operating schedules and financial viability conditions are not met.

Likewise, the grapevine is that, Vijay Mallya has been treading on a pre-drafted and premeditated plan of letting the Government of India close the King Fisher Airlines, through DGCA, so that he will NOT be blamed nor responsible for the loans he took from PSU banks.