How Kingfisher Airlines floored Vijay Mallya5 min read . Updated: 27 Feb 2016, 01:54 AM IST
Vijay Mallya had grand plans when he launched Kingfisher Airlines in 2005a look at what went wrong in the story
Mumbai/New Delhi: Liquor baron Vijay Mallya launched Kingfisher Airlines Ltd in May 2005, a year before IndiGo, run by InterGlobe Aviation Ltd, took to the air.
IndiGo is now India’s largest and most profitable airline. It listed shares on stock exchanges last year after raising a truckload of money.
Kingfisher Airlines has grounded an empire—the UB Group—and has not taken to the air since 2012.
Mallya had grand plans for the airline when he launched it.
“We are not entering the business of transportation, but we are going to be in hospitality business," he told his core team.
The project to launch the airline was code-named ‘Project Thunder’ and the launch date of Kingfisher Airlines was fixed close to his son Sidhartha Mallya’s birthday. Urban legend has it that the airline was a gift for the son. One of the members of the core team says the launch date “may have been coincidental or intentional".
But there was one thing, he adds, that the team was clear on—it would create a great airline brand.
Mallya asked his team to meticulously study over 5,500 frequent flyers. He personally interviewed cabin crew to make sure that no mistakes were made in hiring.
He launched the airline on 7 May 2005.
In the evening function at the Air India hangar in Mumbai, which was attended by a whole galaxy of stars and the who-is-who of Indian politics (across party lines), Mallya, who was then a member of Parliament, spelt out his dream of creating India’s largest airline.
“This is the moment we have been waiting for. Our entire Kingfisher Airlines team has been working relentlessly to make this vision come true. We are finally set to conquer the Indian skies. I offer to you, Kingfisher Airlines. Come fly the good times with us," he roared.
The planes were new and well appointed.
The flight attendants were pretty (Mallya claimed he appointed them himself).
The food was good.
There was in-flight entertainment.
There was a first-class.
And while India doesn’t allow liquor to be served on domestic flights, there was free liquor to be had in the lounges for first-class passengers.
Even better, in a desire to wrest share from rival Jet Airways (India) Ltd, it was generous with upgrade vouchers. Indeed, anyone who was someone in Bangalore got a call around the time of the launch, with an offer of a huge number of upgrade vouchers if they shifted their custom to Kingfisher.
An executive at a rival airline recollects how high-flying executives gave up tens of thousands of frequent flyer miles earned on Jet to fly Kingfisher.
But Mallya wasn’t content. He wanted to fly overseas routes. Because Indian rules allow only airlines that have been in existence for at least five years to do so, he set out to acquire one.
He bid for the ailing Air Sahara in 2006 when Jet was looking to buy it. Mallya’s interest only served to up the price for Jet, which bought Air Sahara and rebranded it as JetLite.
Then, in 2007, he got lucky (or unlucky).
He bought the bleeding Air Deccan, India’s first low-fare carrier, promoted by G.R. Gopinath.
Mallya chose the same Air India hangar to throw a party to celebrate the acquisition of Air Deccan and announced that he was keeping his promise to create India’s largest airline. Air Deccan had the country’s largest network at the time.
Kingfisher Airlines merged Deccan Aviation Ltd, which ran Air Deccan, with itself in April 2008. Initially, Mallya rebranded Air Deccan, which was a household name then, to Simplifly Deccan and later to Kingfisher Red.
In September 2008, Mallya launched Kingfisher’s first international flight—from Bengaluru to London.
Then the global financial crisis struck. Kingfisher survived the first few years of the crisis, but eventually the financial pressure started showing. It didn’t help that the company was managing two brands, one high-end, one low-cost. “It was difficult to brand the airline as high-class and yet be a low-cost airline at the same time," says Nawal Taneja, professor emeritus at Ohio State University in the US, who serves as an adviser to airlines and governments worldwide.
The airline had to cut its fleet to 28 planes from 66 owing to a resulting cash crunch.
It started bleeding money. Payments to vendors and employees were delayed. Other companies that were part of Mallya’s UB Group extended loans and bank guarantees. Mallya himself pledged his shares in those firms and pumped money into the airline.
Mallya tried to find a foreign airline that could invest in Kingfisher but Indian rules at the time did not allow foreign airlines to invest in Indian ones. Mallya, who was still an MP, lobbied to no avail. Operations suffered. Service deteriorated, Cancellations became common. And employees struck work demanding delayed salaries.
Finally, the government suspended Kingfisher’s licence.
Gopinath, the founder of Air Deccan, has had a blow hot-blow cold relationship with Mallya but he still speaks of him fondly.
He believes there was a conspiracy to kill Kingfisher.
Indeed, a month after Kingfisher was grounded in late 2012, the government cleared the proposal to allow foreign airlines to invest in Indian ones.
“The government of the day allowed Kingfisher to collapse. 10,000 people lost jobs. Even now many of them are without jobs," says Gopinath.
Craig Jenks, president of New York-based Airline/Aircraft Projects Inc., says the airline industry is very challenging, demanding and capital-intensive while huge investments can be with poor or negative returns.
“There is a history of successful non-airline business people believing they can do a much better job than current operators. The historical reality is that few such entrants have been able to master the industry’s complexity and turn a profit," Jenks adds.
High oil prices, which used to account for 40-50% then, did not help.
Now, oil prices have fallen for the past 18 months, helping Indian airlines make money.
“Kingfisher Airlines failed to understand the functioning of the airline in terms of key pressure points, both revenue and cost drivers, and more importantly, the need of capital to be able to withstand external shocks. This is true of Indian aviation and not just one carrier, but the impact of a combination of all of these hit Kingfisher more than the others," says a former Kingfisher executive on condition of anonymity.
Today, Kingfisher Airlines owes banks around ₹ 7,000 crore.
And it is just a memory, a fond one for some who enjoyed the good times while they lasted.
“Make no mistake—everyone loved Kingfisher. It was an endearing airline brand globally,"says Gopinath, who adds that neither the government nor the banks made a serious effort to save the airline.
Eventually, “nobody got anything", he says. “It hurts that your dream died. That baby is no more."