Kingfisher Red was finally shutdown in February A case study on the downfall of kingfisher airlines of Rs Mallya suffered a total loss of Rs Strategic Issues 9, He took loan from 17 banks. His highest 1. The major mistake committed by Mr. Mallya is that he debt was with State Bank of India of Rs.
From failed to make proper decisions. It also owes Rs crore to the basis of luxury sells. Mallya being a liquor tycoon was unable to identify the of India, among others, data showed. Customer might pay extra for alcohol but not for transport, because Conclusion transport is type of necessity than luxury. Indian airline business has seen ideal growth and revolution 3. In Deccan airlines was rebranded as Kingfisher which will go on in coming years.
Many airlines come and Red by Mr. So Kingfisher Airlines operated go while the others have gained a strong ground in this both business and economy class airlines. This looks business. Mr Mallya was in different project suffered huge downtime due to improper strategic businesses at the same time.
For his liquor business decisions and mismanagement by the group. Instead of officials were appointed but for airlines all was going trying to utilize this grand airline project opportunity, Vijay by itself. The business needed the attention of Mr Mallya focused to achieve a glamorous status.
The airline Mallya. According to reports, domestic flights, 20 including big goals for settling in international market but international flights were flown by KFA. It also owned neglected the basic economic class. The strategy practiced 67 aircrafts. This increases aircraft lease rental. In , by Vijay Mallya could not sustain for long and proved to be the lease rental crossed Rs.
Mallya is now the only 5. In there was a time when Kingfisher was not able board member left holding on to the brand. Salaries were due for 4 For a business to be successful the main focus should to 5 months.
This was noticed by improving quality of service and standing in unity to find Directorate General of Civil Aviation DGCA and they best solutions to problems.
Conflict of Interest: None. Economic Slowdown Economic slowdown in is another external factor for References downfall of the Kingfisher. In , first international route 1. Because of 2. Kingfisher default bill: This is how much defunct airline owes international airport which highly impacted Kingfisher to banks; largest dues to SBI - The Financial Express airlines.
Later airline was gifted to Siddarth Mallya J Manag Res Anal ;6 2 PDF file:. Invited for research articles. Call for papers - November Call for Editorial Board Members. Luai Farhan Zghair. Firuza M. Faraz Ahmed Farooqi. Eric Randy Reyes Politud. Elsadig Gasoom FadelAlla Elbashir. Eapen, Asha Sarah. Arun Kumar A. Zafar Iqbal. Ruchika Khanna. Rasha Ali Eldeeb. Pralhad Kanhaiyalal Rahangdale.
Nicolas Padilla- Raygoza. Mustafa Y. Muhammad shoaib Ahmedani. Lim Gee Nee. Jatinder Pal Singh Chawla. Mark Then, route rationalization will allow it to pare down the plan to acquire over new planes, thus, resulting in massive savings. The combined airline will integrate critical departments like maintenance, flight operations, cabin crew, airport terminal services and marketing support and also gain from each others slot allocations and access to airports.
The international market both outbound and inbound , though growing at a healthy 17 per cent per annum, is already crowded and foreign airlines fly two-thirds of Indian passengers. Investors, though, werent very happy. The Deccan scrip slid from Rs to a low of Rs. Post-merger with Air Deccan, things kept going south. In the second quarter of , Kingfisher reported a net loss of Rs. Its income from operations declined by The operating costs of the company were high and so were the loan and interest amounts.
Kingfisher Airlines had accumulated losses of Rs. Mallya says high cost of aviation turbine fuel ATF and weakening rupee were the reasons. But the cost of fuel and power as a percentage of Net Sales were steadily decreasing, but the percentage of Loan and Interest burden kept on increasing Fin. The table effectively proves that the main burden on Kingfisher was of its interest and loan amount. Kingfishers book equity had been wiped out although audited financials pretended otherwise. The airline was burning cash at a rapid rate, an estimated Rs.
In the year a debt recast package was done. It is believed that non-performing loans had been repackaged into subordinated debt, and that Kingfisher had defaulted on its obligations is unquestionable. We do not believe that Kingfishers antics would have found any takers in a responsible credit market and that the airline would have been liquidated by then.
During , Kingfisher defaulted in principal repayment of Rs. Between July and March , Kingfisher defaulted on interest payments of Rs. Foregone principal repayments are undisclosed. Therefore, from the beginning of financial year to the end of Financial Year , the airline defaulted on dues of at least Rs. Data for the period April-June is unavailable. The convoluted logic of debt restructuring, via acquisition of CCPS, of an organization that doesnt have the cash to meet its obligations, - which were subsequently converted into ordinary shares of Kingfisher at a premium of Moreover, subscribing to common equity at a premium implies that the banking consortium is now sitting on a significant mark-to-market loss on its equity holding in the airline.
As a result of this, the company was not paying its dues to various institutions and certain moves were initiated by various institutions like the Mumbai International Airport sent notice for Rs.
Kingfisher was in danger of losing a number of primeflying slots. International Air Transport Association asked travel agents to stop booking tickets on Kingfishers behalf for failure to settle dues since February, Employees protested due to delay salary payments.
Kingfisher curtailed its international operations initially and then suspends them. It also suspends its domestic operations from a few cities. Then Pilots started reporting sick to protest non-payment of salaries.
Flights were cancelled, 34 of its aircrafts are repossessed due to nonpayment of lease rentals. On October 6, , DGCA issued show-cause notice to Kingfisher asking why its flying permit should not be suspended or cancelled. And on October 20, , the airlines permit got suspended and experts said Vijay Mallyas United Breweries group needs to pump in over Rs. In Dr. Mallyas defense, he did try to pump in loans of Rs. After this the banks started to recall its loans.
In the following months, many employees went on strike, senior executives quit and Kingfisher again posted a Net Loss of Rs. In the March , the consortium of lenders led by State Bank of India considered declaring Kingfisher Airlines a wilful defaulter. Vijay Mallya, lenders said. We now need to study the report and authenticate the mapping transaction trail undertaken by the consultancy firm.
On August 21, , Punjab National Bank issued notice to Kingfisher alleging the carrier had wilfully defaulted in payment of outstanding dues of over Rs crore. Mallya was declared a wilful defaulter by IDBI, a series of events in the related companies started taking place. Diageo Plc, the worlds largest distiller, is tightening corporate governance practices at United Spirits Ltd USL and the UK-based company has hired a consulting firm to vet USLs contracts with other UB Group companies to ensure these agreements are arms length transactions.
Deloitte, which has been working with USL on various projects, has been asked to ensure that the terms of USLs contracts with United Breweries Holdings Ltd UBHL , the UB Groups holding company, and other group firms, do not give an unfair advantage to these companies, according to two people familiar with the matter.
These transactions included buying and selling of goods, loans, deposits and advertisement and sales promotion expenses. USL was owed Rs. USL, Indias largest liquor maker, also gave loans and deposits to a group company worth Rs. Both USL and Deloitte declined to comment. Diageo, which completed its purchase of a The executives were later transferred to UBHL.
The following table outlines the valuation of UB groups key investments that are readily marketable:. As outlined in the table, the market value of UB groups holdings is only Rs. That could mean only one thing: Both UB group and Kingfisher are at the mercy of Indian financial institutions and shareholders should not stick around for worse to come. Both, UB group and Kingfisher are effectively insolvent.
Conclusion Kingfisher Airlines is deep in the debts and losses. So should the government organize its rescue? Critics say that it has already been rescued in the past thanks to Dr. Vijay Mallyas political clout, yet it has never made a profit since inception.
When millions of small businesses are allowed to go bust when banks cut off credit to thousands of smaller defaulters, rescuing Kingfisher will smack of crony capitalism. The airline has defenders too. Kingfisher has justly earned a reputation for excellent service standards. Quality is always worth preserving.
We need to save Kingfisher without saving Dr. Indias airlines suffer from high taxes on fuel, rising world prices and an obligation to service some uneconomic routes to destinations like the Northeast. Yet this did not prevent them from making profits in the past. Even today, Indigo is profitable. So are many global airlines. Indeed, in the quarter ending June, United Airlines turned profitable after losing money for six years, Delta reported the highest quarterly profit in history and Lufthansa doubled its profits.
The quarter ending September has been only somewhat less profitable for them. So, Kingfisher and other Indian carriers cannot claim that global conditions are terrible. Kingfisher has already been rescued. Mallyas political clout rather than companys future prospects. Even after that the company has sunk deeper into the debt. Even after being restructured and slashed, its debts exceed Rs 7, crore. Government concessions to the industry may save other airlines, but not Kingfisher. Mallya really wants yet another chance, he must be told to bring in at least Rs 3, crore of fresh equity.
If he cannot entice the investing publicwhich is probablehe must sell his other assets. Indeed, UB Holdings itself is reported to have provided bank guarantees of over Rs 16, crore to the banks. If Dr. Mallya will not sacrifice his other assets for Kingfisher, then he cannot ask others to sacrifice their financial interests for him. Bibliography Company start-up info.
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