Kingfisher airlines - What went wrong with the king of good times?

King fisher brand has always been synonymous with good times or so what we thought. As the Directorate General of Civil Aviation (DGCA) announced the suspension of flying license of Kingfisher Airlines on 20 October 2012, seven years after it commenced operation, the already financially crippled airline came to an abrupt halt.

The  good times can not last for ever. Can it? Once voted the best carrier in India, the business model of Kingfisher Airlines was always a recipe for disaster. At least that is what the media reports. Its flamboyant owner Vijay Mallya has been the target of media bashing ever since troubles surfaced in Kingfisher airlines.

KFA was an airline for people with a taste for luxury.  Fliers were treated to expensive wine, quality food and best entertainment facilities even on domestic flights. The airline staff were the best paid in the country until they stopped receiving their salaries from early 2012.

If everything about the airlines is so good, what could have gone wrong? Mr. Mallya wanted every one to have a good time. There is nothing wrong with that. Well, it would have been ok if the money splurged was from his own pocket. He borrowed money from the banks. The airline has never made profits to sustain in the business. No body is going to give Mr. Mallya a blank check to splurge forever. The airline’s in-flight service standards were set too high to maintain for a long time which made it out of bounds of the country’s biggest consumer section , the middle class.

When the going gets tough, the tough goes partying. Mallya, an industrialist and a liquor baron known for his flashy lifestyle and lavish parties,  is away jet setting in his private jet.  KFA is saddled with a loss of Rs.8,000 crore and a debt burden of another Rs.7,524 crore, a large part of which it has not paid since January. It was declared a non-performing asset (NPA) by bankers earlier this year. Kingfisher's lenders include banks such as SBI (State Bank of India), Bank of India, Punjab National Bank, IDBI to name a few.

Every individual is plagued by hard times, but how one goes about it is a matter of one’s position in the society. We begin with the aam admi who are identified as the ones who do their grocery shopping with ration cards instead of visa cards. These modest, hardworking people pray that they should be blessed to earn enough money to afford two square meals. Then you might belong to the class who constantly wail about their back-breaking work schedules, spend most of the days in a cubicle. These hard-working but not always modest people pray solemnly before an idol with several incense sticks: each stick denoting a 1000 rupee increment in their salaries. Next in line are the Page 3 elites whose idea of a prayer is to brainwash the Gods to take their side by offering golden doors to guard them at night in exchange of financial blessings. No wonder the incense sticks always take a back seat in front of god.

That is exactly what Vijay Mallya did recently to wave off his financial problems. His latest offering to god is a 2 kg gold-plated door for a temple of Lord Subrahmanya at a cost of a whopping Rs 80 lakhs.

After a bit of deliberation, one does feel regretful for Vijay Mallya. He had such a fine thing going. He was raking in billions from the liquor industry. And then he was an unfortunate victim of the ‘aviation virus’, infected by the bug that once bit Richard Branson of Virgin Atlantic. And then he met the perpetually unlucky Capt. G.R Gopinath. Anything Capt. G.R. Gopinath touches turns to dust. He palmed off his worthless Deccan Airways to Vijay Mallya.

Things took a new turn when Vijay Mallya squandered away some more money to buy IPL Cricket team called Royal Challengers. Whatever liquidity was remaining was sucked up by the IPL cricket team. Whatever money Vijay Mallya made out of the liquor business snatched away by Kingfisher and Royal Challengers.

But what is more worrying is that Vijay Mallya has become an “inspiration” for other businessmen as well and let to their ruin as well. The latest casualty is T. Venkattaram Reddy, who was such a successfull and sober businessman, who created the Deccan Chronicle empire. However, after he was bitten by the “Vijay Mallya bug”, and splurged millions on the “Deccan Chargers”, a motley team of cricketers. Money which ought to have been spent on expansion plan for Deccan Chronicle was spent on having late night parties with celebrities. To make matters worse, T. Venkattram Reddy even splurged money on an aviation company called Aviotech, a chartered flight service.

Well, the predictable happend. To tide over his liqudity problems, T. Venkattram Reddy allegedly committed fraud and forged share transfer documents, meant for pledging with the lenders. Lenders of Deccan such as Axis Bank, ICICI Bank, Canara Bank, Corporation Bank and Yes Bank stare at the spectre of losing a substantial part of their lending (as high as Rs 4000 Crores).

So what is next for Vijay Mallya and Kingfisher airlines? Would raising a few thousand crores rupees salvage the flawed business model?  A foreign partner taking a stake in the airline may not help matter much either unless the business model is overhauled. Kingfisher needs an able leader to fly the airlines and unfortunately that able leader is not Vijay Mallya.