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Collapse of Kingfisher Airlines
"Kingfisher! King of good times" is seeing its worst time in recent months. All the 'service with glamour' provided by Vijay Mallya is not looking so glamorous at the closed ticket counters. Several flights have been cancelled and Government is swinging between the idea of shutting down or not shutting down the service. The losses incurred by the kingfisher is around 7000 crores. Revenue department is also blaming the airlines for tax evasion of another 2000 crores. His shares tumbled around 19 percent at BSE. Airlines, along with its owner, are facing its worst financial crunch.
There are numerous reasons for the present condition of the kingfisher airlines. Every big business needs an expert team of CEO and other officers look into the day to day activities. But here the scenario was different. Mallya kept this business under his direct control and this was one of his biggest blunders. This caused a major mismanagement and confusion among the employees. Administration of India's second largest aircraft service was going down the lane. Mallya group continuosly blamed Government for the dismal performance of airlines. According to him, raising fuel prices and slow GDP growth has contributed to their misery.
To balance all this, they started cutting the salaries and perks of their staffs. They didn't get their salaries on time due to which they refused to come back on job. Sometimes they also vented their anger and misbehaved with the passengers adding fuel to the fire.
Another reason for its collapse is the takeover of Air Deccan in 550 crore acquisition. There were mixed reactions, some saying that it can be a disaster and some saying it to be a wonder. Kingfisher owned around 26 percent stake. Major advantage was that engineering and aircraft cost decreased due to almost same routes. But Kingfisher incurred losses of Air Deccan also. That's when Vijay Mallya tried his luck and gave birth to a new low cost carrier 'Kingfisher Red'. It was awarded death sentence in few years although low cost carriers were at its best. He provided goody bags and air hostesses provided a beautiful sight with their 24*7 'Pan Am" smiles. So customers started choosing Kingfisher Red over its mother brand because of same facilities with cheap prices. Kingfisher Airlines started incurring losses as it was typecasted as mainly the aircraft for the riches. Mallya started decreasing business class seats and routes to compensate the losses. But unfortunately, it all backfired.
Again when Mallya was already in turmoil, he tried another shot to ruin himself. He did not cared about his domestic flights and started the service on the international routes where competition was even higher with better facilities. This again provided him with losses.
To compensate for these losses Mallya took loans from banks including SBI and many private banks with share from its UB group as collateral. It even collateralised its brand name 'Kingfisher'. Now the group is asking for some time and easier interest rates that may help it to recover. But with rigid attitude of banks, its looking like a no win situation for Mallya group. Tax authorities have already froze its bank account for the nonpayment of dues. According to civil aviation minister, Ajit Singh, Government will not bail out the airlines. He said that it is the responsibility of the owner to get himself out of the crisis. He, however, added that Government does not want the private companies to shut down their business. Finance minister has already stated that SBI will not provide fresh loans for the debt ridden private companies as they did not adhere to the provided guidelines.
Amidst all these problems, Kingfisher's condition is worsening day by day. Mallya, who did not leave a single business sector ranging from F1 team to cricket team to kingfisher calendar is paying heavily for neglecting one of the most risky and competitive business of aviation industry. Now only time will tell that what will be the future of this 'once most stylish and attractive' aircraft carrier. Everyone's fingers are crossed and are expecting the airline to come out of this mess before Vijay Mallya starts screaming 'Mayday'.
- Kaustubh Verma