From Scintillating To A Dead Star: Will Mallya Do A Comeback?

Posted on August 3, 2012 in Business and Economy

By Kriti Rathore:

I am sitting on my seat and watching the movie Namesake. The red clad women, wearing fitted skirt and a smart red blouse suddenly asked, “Ma’am what would you like to have in the dinner? Vegetarian or non-veg?” I went for the first option. The ambience is captivating, service flawless and the air hostesses have got pretty faces, moreover they are impeccable in their service not like the ones in Air India. Precisely, my journey to Vienna was splendid.

Literally, I was in a state of awe when I came to know that Mr. Vijay Mallya is going through heavy debts and the flying license may get ceased too ,crores of debt in foreign banks adds to his trouble. What went wrong with the airlines? Where were the loopholes in management? Why couldn’t Mallya resolve the mystery around? These questions haunted me and through the news papers and internet I got the basic idea that Mallya’s airline dream is falling like cards. I could not ingest this fact without a hitch as I loved Kingfisher airlines and the epitome of Mallya’s king size style completely.

With losses of about 5 crore a day, ₹6250 crore debt, bank accounts almost frozen by the tax authorities , everything is on the verge of a collapse. It seems the wings of Mallya in the aviation sector are being slaughtered bit by bit. Acceptance is hard but u can’t drift from the bitter truth, turmoil is everywhere around. Mallya’s flying empire is collapsing and the worst part; he can’t recollect the falling bricks.

Is it Mallya only who could not cope with the problems plaguing this industry or it is the whole aviation sector of India? Sectors other than aviation are accelerating at a fast pace but the growth in aviation sector is still less that 3%.We all are aware of the fact that GDP won’t grow and the economy won’t prosper if aviation is not a part of it. Air fuel is very expensive and then at the same time, government has imposed heavy taxes on the imported aircrafts and other aviation imports (spare parts etc.). It becomes challenging for the companies to administer everything at the same time.

Mallya’s case was alike; still he did some greater blunders which later added to his agony. Actually, Mallya is a versatile man; he had hands into many places like:

1. He is the liquor baron and the UB group is the second largest liquor company in the world by volume. Brands like bagpiper whisky and kingfisher beer are under this flag. Acquisitions made under Mallya are Whyte & Mackay.

2. Formula One: Mallya and a Dutch family bought the Spyker F1 team for 88 million Euros in 2007.

3. Football: he invested in the football clubs Mohun Bagan and East Bengal.

4. Cricket: Royal Challengers Bangalore cost him $111.6 million in 2008.

5. And other expenses like, 26 properties across the world, owns cars, sword of Tipu Sultan worth Euro 175,000, bought the personal effects of Mahatma Gandhi for $1.8 million, owns luxury yacht and more.

That is why Mallya got deflected into so many pat’s and invested more and more in spite of going through heavy losses in Kingfisher Airlines. As stated by The Week Magazine, Mallya knew how to become big, global but he didn’t take care of revenue generation and cost control. Also, G.R Gopinath, founder of Air Deccan said that Mallya chose a model where cost is more than revenue (His model was hub and spoke where small towns are connected with the large metros and then connecting them to larger destinations across India and abroad).

Lastly, I would say that the airline business is really intricate and very cutthroat. we can term it as dog eats dog types, which is capital intensive with a very low profit margin. As the air traffic in India is prospering at a large scale, in the same respect government should reduce the taxes on the air fuel imported and all the other aviation products. Because if the aviation sector does not grow hand in hand with the GDP and the economy in general, India cannot keep pace with the other fast growing economies like China, Brazil and more.

A simple yet a captivating quote by Claude Grahame White, which will add a fuel to my thought of engine says:
“First Europe, and then the globe, we will be linked by flight, and nations so knit together, that they will grow to be next-door neighbours .What railways have done for the nations, airways will do for the world.”