ibnlive » Business

Oct 23, 2012 at 05:50pm IST

Kingfisher Airlines: What brought it down

New Delhi: So how exactly was Kingfisher Airlines killed? The airline company was Chairman Vijay Mallya's muse. He chose to run it himself, even deciding to interview air hostesses, pilots and other staff members himself. So did this obsession lead to the company's decline? Apart from Mallya, few others were allowed to run the show. Smallest decisions had to wait for the Chairman's go-ahead, say management insiders.

However, the real crumble began with the acquisition of Air Deccan for which Mallya paid over Rs 550 crore. In a mad rush to fly international, the deal was struck but young Kingfisher was not able to cement the marriage. The low cost model of Deccan clashed with the premium Kingfisher product, resulting in total failure and ultimate grounding of Deccan.

Insiders have also pointed to poor financial management as the other big example. Mallya brought in financial heads at the UB Group to run the show at Kingfisher Airlines. Rivals like Indigo, on the other hand, hired airline finance experts. People used to running a liquor business were unable to grapple with the low-margin airline business.

Mallya borrowed heavily from banks led by the State Bank of India (SBI). The airline which never made profit since the time it launched in 2003 had many takers. Experts say banks could not refuse as it was promoted by India's top liquor brand. Then came the 2008 fuel crisis. Fuel prices skyrocketed but Kingfisher continued to expand. It continued to lease aircraft for its foreign services, despite passenger traffic showing signs of a slowdown.

Leadership was the final nail in the coffin. Mallya never had a professional CEO run his airline. When he got one, it was too little too late. Sanjay Agarwal joined Kingfisher when the airline was already in a tailspin.

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