By Shreyan Acharya, Vivekananda Institute of Professional Studies, Delhi.
“You need to be gutsy, you need to have fire in your belly”
The above quote indicates that Vijay Mallya, one of the richest Indian and stylish entrepreneur, does not fear in taking risk. Mallya’s policy of life is “live like king size”. Vijay Mallya popularly known as “King of Good Times”, been seen as a role model by the many young entrepreneurs. His lifestyle and lavishness attracts several upcoming entrepreneurs. Kingfisher is popularly known for its magnificent liquor industry. As, it is one of the profitable industry of Vijay Mallya.
India is a developing country where economic reforms were liberalized few decades ago. Prior 1991, various industries were under the strict government regime. One of such industry under it was the aviation industry. With the advent of the economic reforms, various governmental regulations were liberalized and India’s market was opened for the entry of global industries. India had set its foot in the new era of globalization, which encouraged various private industries. The government, after several deliberations, took this decision in the wake of the deteriorating economy and a growing fiscal deficit. Aviation industry, which was earlier under a strict government regime was opened up for private companies. This saw the ever increasing boom in the aviation sector and huge private investment contributed towards the betterment of the industry and infrastructure improved on a massive scale.
The above mentioned quote states that Vijay Mallya did not fear taking risks and with his iconic personality and farsightedness, he also showed keen interest in investing in the aviation industry and this witnessed the arrival of Kingfisher Airlines Limited in 2003. Kingfisher Airlines was a Bangalore based company. With Vijay Mallya’s fashionable vision, it revolutionized the entire aviation industry. Mostly, it was known for its new aircrafts, lavish interiors, well-dressed and glamorous cabin crews. The company emerged as a stiff competition and once, known to be best airline industry domestically. With more emphasis in providing royal facilities, the airline introduced in-flight entertainment also called IFE system for the passengers. Kingfisher Airlines offered several unique and lavish services to its customers. It included personal valet at the airport for carrying baggage, exclusive lounges etc. The airline offered attractive services to its on-board passengers. The years following its inception proved to be beneficial for the airline, in terms of its booming business, with a good track record of customer satisfaction.
“A recession is when you have to tighten your belt, depression is when you have no belt to tighten. When you’ve lost your trousers- you’re in airlines business.”
- Sir Adam Thomson
The above quote contradicts the above discussed benefits of the airlines business. The year 2008 saw the reverse of the booming business. The economic crisis led to the major downfall of several business houses. Major economic players shattered and many strong economies witnessed the disastrous downfall. With this hit even the aviation industry could not rescue itself. It was the time when air passenger traffic started dripping and fuel prices went skyrocketing. The passengers were reluctant to pay high fares, which increased due to the rising fuel prices and this affected every sphere of the society. In these dreaded times, many industries were either shut down or sold off. Air Deccan was one such company which desperately looked for a buyer. Vijay Mallya saw it as an opportunity of acquiring the company and immediately, bought the stakes of the company after getting necessary approval from SEBI, through this merger, Kingfisher Airlines got the immediate listing and license to fly overseas. This was seen as a game changing strategy and sudden boost in the dreaded times. But, unfortunately, it did not turnout to be a winning strategy and even the Kingfisher Airlines got affected with the major market hit. Due to the rise in the international prices, the fuel prices increased massively which led to the increase in travelling fares and also, incurred other expenses. Overall, due to the global hit, the prices of almost everything were on the rise and this overall deteriorated the profit margins of the company. It also led to higher borrowings and it was estimated that the airlines were under the debt of Rs. 8,000 crore. Vijay Mallya’s move of trying to put the blame on the authorities and media houses on whom he alleged that they are trying the sabotage the company did not turnout to be successful. His efforts of trying to borrow more failed as the already existing accounts were frozen by the tax authorities. Due to the insufficiency of funds, the salaries of the employees were also hit and it deteriorated. Mallya personally tried to reach the employees and created a mechanism where the salaries overdue could be compensated. The bad times left a major impact on the employees as well, as many lost their jobs. Along with the market crash, many luminaries observe that lack of uniform leadership due to the multiplicity of businesses also affected the efficient management of the company. The affairs of the company were not stable and it lacked decisiveness.
In the end, the King of Good times could not rescue his drowning company and it has ended with a bailout. Once, a reputed and profit making company with full customer satisfaction by proving lavish facilities ended.