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Letter From The Editor: How to Kill an Airline
Other than the Satyam saga, nothing comes close to the sordid tale of hubris and irresponsibility that defines the mess inside Kingfisher Airlines
Before we answer that question, let’s first survey the grim reality. For the past five months, about 4,500 employees of the airline haven’t been paid their salary. Many of them say they can’t quit because they won’t get a single dime out of their dues from their employer. Airports, which allowed the red and white aircraft to land and take off, haven’t been paid either. Faced with the spectre of bounced cheques, they’ve now moved courts to recover their dues. No one has any clue how long it will take, though. A clutch of banks have lent Rs 7,000 crore in all to Kingfisher Airlines. And they don’t have enough collateral to cover even a fraction of their debt. At least some of the lessors were perhaps smarter. They simply repossessed their aircraft.
So who perpetuated the crisis?
Vijay Mallya: His vision of building a global airline in less than a decade was simply far-fetched. But now that the bet has gone horribly wrong, his arrogance simply prevents him from looking beyond the FDI option. The trouble is that no sensible foreign airline will invest in Kingfisher.
The Public Sector Banks: They forgot to do proper due diligence and, perhaps, came under enormous political pressure. Now, faced with a huge NPA (non-performing asset) situation, they’re still hoping against hope that the promoter provides a quick fix.
Employees: Many of them were attracted by the aura and the glitz that Mallya manufactured. Little did they realise that the game was unsustainable. Perhaps some of them will now stop believing in the cult of the heroic leader.
The Regulator: All this mess happened under the watch of the DGCA (Directorate General of Civil Aviation). And they didn’t blink until it was too late. It’ll take nothing less than a miracle to revive the airline. All one hopes is that someday we learn the right lessons from the Kingfisher Airlines misadventure.
Best,
Indrajit Gupta
Editor, Forbes India
Email: indrajit.gupta@network18online.com
Twitter id: @indrajitgupta
(This story appears in the 20 July, 2012 issue of Forbes India. To visit our Archives, click here.)
Comments 7
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Ashirbad Sahurightly said. according to me there is another criticism that a person having experience of a liquid company how can he take possession of a aircraft business which is affected by global issues. the second thing is that take the example of southwest airlines the airline is successful domestically..if KA would have focussed domestically than it would not be in troubles..
on Jul 15, 2012 -
Maclean Andrades
Its easy to give opinions in hindsight. It takes great courage to take risks to attempt something that has not been done before in such a time frame. V Mallya was and is still trying to make his dream of having a world class airline in India. Please also take the time to research the other factors involved in the challenges that he has faced. Is it not global and domestic conditions that have been a huge drag for the airline industry as a whole. If economic conditions had stayed favourable i am sure this venture would have been successful. I am not trying to ask you not to report, just be a bit more objective and recognize the effort that is needed to attempt great ventures....
on Jul 12, 2012-
Vimal
Mallya may still pull it off,by getting the govt to \'lean on\' PSU banks etc. He managed to scuttle the DGCA\'s term extn on the same day that a warning of licence cancellation was about to be issued to KF. The alert signs came when it was proposed to convert fresh loans to equity as part of debt re-structuring. The Hi-Flier has just under 6% stake in his \'Great venture\'. He is playing around with public money. SBI alone has 1400 cr exposure to KF. Captalism means survival of the fittest,right. He should sell off his IPL team,NDTV Goodtimes and find the money.After all,if a sugar or textile mill or cement company owner has similar problems,govt will not bail them out,right ? In my opinion,the editorial has not been harsh enough.Time to call a spade as such.
on Jul 13, 2012
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Loyola
You really seem to have it in for Mallya, wonder what's your vested interest in this specially since your only reporter is Cuckoo. Sorry to comment that Forbes reporting is very substandard. Find it exceedingly difficult to believe that this is still a magazine that garners world opinion on business, looks like its seen better days or is out of touch with the prevailing mood ..a bit like Time magazine.
on Jul 12, 2012 -
Aj
Vijay Mallya, PSBs, employees and regulators..well the list is incomplete by missing out Journos/ Media people..weren\'t they also feeding on the glamor potion and painting the TV/papers with rose tinted glasses while Kingfisher was bleeding red..It was media who created the larger than life persona of Mallya..It\'s time they held themselves responsible too..
on Jul 10, 2012 -
Sachi Mohanty
I am curious about why the PSU bankers were on the frontlines of lending to a luxury airline? Is it a proven and hence risk-free business? Clearly the PSU managers were hoping for or dreaming of \'glamour by association.\' These middle-aged bureaucrats must have fancied the lifestyle of the King of Good Times. Never underestimate the power of psychology. This is perhaps a weird sort of a honeypot mechanism. Or may be a straightforward sort. Who knows ...
on Jul 7, 2012 -
Ashok Pai
Yet another Jugaad ? when will we rise out of jugaad culture ?
on Jul 7, 2012
