"The Scam of Good Times"

Updated: 7 days ago

Most of you would have guessed, I am talking about the GREAT Vijay Mallya so-called as "the king of good times"


Let's discuss the life of once 40th richest man of India, Vijay Mallya from the absolute start.

The start of a journey

He was born in a very rich family, his father Vittal Mallya was a businessman. Vittal Mallya was the owner of United Breweries a liquor or I should say a Beer company.


This company was not founded by Vittal Mallya nor by anyone of the Mallya family. This company was started by Thomas Leishman in 1915, Mr. Mallya joined the company when he was 22 and started acquiring its shares in 1946-1947. In 1947, Mallya was elected as United Breweries' first Indian director. After a year, he replaced R. G. N. Price as the chairman of the company. In 1951, he started acquiring breweries and distillery businesses slowly he expanded his business in polymer, battery, food, pharma, etc.


Vittal Mallya had a sudden death in 1983, a 28-year-old Vijay Mallya became chairman of United Breweries. At that time the companies turnover was around 350 crore. A young Vijay Mallya tried his hands in many kinds of businesses which included engineering, newspaper, chemical, but soon he realized that the real potential was in liquor businesses.


Ex-Employees of United Breweries say that Vijay Mallya was very hardworking and ambitious. He worked on his business and the United Breweries group grew like nothing in the field of liquor especially in beer. He worked on expanding the business globally as well.


CREDITS


As liquor Advertisements in India are banned he used his lifestyle and the kingfisher calendar etc. to advertise the business.


CREDITS

The way he names his villa and his IPL team was a masterstroke in advertising the company.


The Fairy-Tail


In March of 2005 United Breweries became the 2nd largest liquor maker in the world.


Using his Business genius he became the 40th richest person in India and topped the charts for many years to come. Southern California University gave him the degree of doctorate in business and administration. He also holds the "officier da la legion d'honner" award or the highest civilian award given to him by the French government.


In 2005, on his son Siddharth Mallya's birthday he launched Kingfisher Airlines. The airline business is a heavy capital business. It demands a lot of capital. Mallya wanted to make his airline the most luxurious airline in India. Vijay Mallya treated his customers as kings. This was also liked by his customers and soon Kingfisher airlines became Indian's 2nd Largest Domestic airline with over 25% market share. But still, the airline wasn't a profitable business.


After this short success in 2007, Mallya decided to expand his business even more and wanted to start International operations with his airline, but the requirements to start international operations were that airline should be at least 5 years old but Kingfisher was only 2 years old. To fulfill the requirement quicker he bought Air Deccan which was on the verge of shutting down and was a 4-year-old company. He had to only wait for a year to start international operations.


Kingfisher was already in debt and wasn't profitable yet.

Luxury = Kingfisher was the equation then, which in turn meant the ticket prices were really high. On the other hand, Air Deccan was a low-cost carrier, Mallya had changed the name of Air Deccan to Kingfisher Red so it got the brand of Kingfisher and did not lose its image of a low-cost good service airline.


Still, Mallya did not like ordinary, so he introduced special facilities in Kingfisher Red also. Therefore, the customers of Kingfisher started traveling in Kingfisher red because there was a very slight difference in the facilities of the two airlines. Mallya had no choice but to increase the prices of Kingfisher red also, due to this customers started preferring other budget airlines in place of Kingfisher or Kingfisher Red.



End of the "Good Times"


In 2008, when Kingfisher was fighting with heavy losses prices of crude shoot up from $38 to $140 per barrel, the value of the rupee decreased and the Recession also came at the same time. All this made their problems grow exponentially. Entering into International operations before becoming a profitable business turned out to be a blunder. Their expenses kept on growing and there the incoming started decreasing.

CREDITS


This is the graph of their losses in crores over a span of 7 years. The losses were so big that Kingfisher airline couldn't recover anytime soon.


When things started going out of hand Vijay Mallya sought foreign investments, Etihad Airways agreed also but at that time FDI i.e. Foreign Direct Investment in civil aviation was not allowed. He requested permission for FDI from the Indian government but no signs of help were shown by the then government too.


He had to close Kingfisher Red and the employees of Kingfisher Airline did not get their salaries for 7 months. The employees went on strike and the operations of Kingfisher airlines eventually stopped.


In 2012, the license of Kingfisher Airlines was canceled and the airlines was shut closed.


Just after the closer of the Kingfisher government allowed FDI in civil aviation so Etihad Airways invested in Jet Airways instead.


As I have said before, the Airline business is a capital seeking business and to generate the capital Vijay Mallya took loans of about 6600 crores on a personal guarantee, after the airlines closed he could not pay the loans back which had compounded to about 9000 crores.


In March 2016, Vijay Mallya escaped to Britain, and today Vijay Mallya is wanted in a case of about 9000 Cr Rupees. About 17 banks gave him loans of very big amounts on personal guarantee or no guarantee.



SOURCE: INDIAN EXPRESS


Till the time, the airline was making money there were no problems, and when the problems arose the company collapsed this happened because Kingfisher Airlines did not have a strong management which could find solutions to the problems.

In the airline industry the profit margins are very less, so for an airline to be profitable is very tough for its owners and the management.


Take the example of Air-India


SOURCE: LOK SABHA QUESTIONS PRS


These are the losses of Air-India a government PSU, these are even more than Kingfisher losses of 2000 CR are normal for the PSU that's why our government has to provide a lot of funds to Air-India every year.

Thank You, for reading the whole post hope you liked it, if you did please like the post and follow us on Instagram by clicking here as well. Don't forget to subscribe to our mailing list for regular updates. That's another post by Zeven done.


Good-Bye

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