INSIDE THE STORY Vijay Mallya bought Air Deccan with his eyes closed. His team never went through the books of the loss making Air Deccan before Mallya agreed to buy it for a total consideration of Rs 1000 crore in 2007. How Mallya rushed into the airline business with Kingfisher Airlines, despite his close associates warning against the move. Kingfisher was to be a gift to son Siddharth Mallya on his eighteenth birthday on May 7, 2005. And no one - not lenders who were skeptical, not other airline veterans nor close associates - would dissaude Mallya senior from taking the plunge.
There are some hilarious instances, some which reveal shocking inattention to detail and still some others which show why Vijay Mallya was never going to succeed in the airline business. Mallya's most audacious and also the most faulted venture has been Kingfisher Airlines, which stopped flying in 2012, with huge unpaid loans to banks, months of salary arrears to employees and very little hope of the airline ever reviving. Now, even the Kingfisher brand has been put up for sale by banks, which anyway seem clueless on how to recover their money.
Kingfisher Airlines was once the toast of wealthy Indians who found never-before quality of service and class with the airline. Now, it only reminds one of unpaid employees, some of the largest Indian banks clueless about how to recover their moolah and an airline which has become defunct.
Was Mallya the only one at fault for taking Kingfisher Airlines down? Or was the aviation business, with its huge overheads, thin margins and heavy Government taxation anyway a recipe for disaster? Did his buying moribund Deccan Aviation prove to be the last nail in the Kingfisher coffin?
Many instances of how the airline was actually started on a whim, why and how it began to falter along the way even as its service levels remained high and why it finally had to shut down.
Some memorable snippets from the entire 'Kingfisher' story:
** Air hostesses delayed meals, not all passengers on a flight got to eat:
By 2010, apart from other problems, caterers were unwilling to supply meals on some flights because of non-payment by Kingfisher. "They supplied fewer food packets, which meant that not all passengers got meals, especially during late evening flights. On such occasions, the passengers had demanded that the pilot give them an explanation in person. The air hostesses were trying their best to manage the situation. On some occasions, they would deliberately delay serving the meals so that not all passengers got them".
** Mallya did not check Air Deccan's books before buying!
"Gopinath told a reporter later that what impressed him about Mallya was how badly he wanted the airline and how swiftly he had moved to bag the deal. When some reporter asked him whether that meant the deal had been made without any due diligence or checking the balance sheet, Captain Gopinath replied that it was true that during the negotiations, neither Mallya nor his officials ever asked to examine the books. They took Captain Gopinath's assurances at face value because they were eager to go through with the deal".
** Not just Mallya, even SBI did no due diligence before lending!
"In order to meet huge expenses which the airline incurred for paying high salaries and building swanky offices, Mallya had started borrowing from several banks (including the government owned State Bank of India), some of which extended the loan without adequate collateral. It looked as if some of the banks had extended loan to the airline based on Mallya's popularity and charisma rather than the real worth of the airline. When the airline started defaulting on repayment, some of the banks had very little as collateral to fall back upon".
** On flight delays, passengers fed unlimited beer, snacks at 5-stars:
"In case a flight was delayed and some passengers protested, they would be taken to the nearest five-star hotel and served unlimited quantities of snacks and beer. A pint of beer at a five-star costs as much as Rs 250 but the airline front desks at airports would grudgingly foot the bill. Some passengers would point out that as Mallya was a liqour baron, the least the airline could do was to serve liquor wherever their flights got delayed".
Many aviation experts point to Mallya's acquisition of Air Deccan as one of his biggest mistakes, something which eventually lead to his airline's loss spiral. And the SBI-led lending consortium of 17 banks can really have no fig leaf to hide its inept handling of the Kingfisher loan portfolio. The consortium has to recover almost Rs 7000 crore from a defunct airline, with almost no collateral!
In the end, Mallya had everyone rooting for him when he began Kingfisher. But he squandered away this immense goodwill. Says:
1) Mallya should have had a professional CEO running the airline instead of taking all decisions himself (CEO was first appointed only in late 2010)
2) What further alienated him from his friends in the corporate sector as well as political circles was display of wealth when hundreds of Kingfisher employees had not been paid salaries for months Both these criticisms seem justified.
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