It is rightly said that one should be relentless in the pursuit of expansion. But this ambition can backfire anytime and can lead to recession. So, to dodge this, it is important to maintain a poise between our expansionary goals and investment. One wrong investment can ruin everything that has been earned by the company. Many companies become restless in the expansion goals initially and then lead an indebted, bankrupt life. One of such companies is Kingfisher Airlines (KFA).
Vijay Mallya, an Indian businessman and the founder of Kingfisher Airlines is rather more famous for fleeing India than for being an entrepreneur.
Kingfisher Airlines commenced operations in 2005 and was declared bankrupt in 2012. Vijay Mallya, in order to avoid justice fled India in 2016 owing Rs. 9000 Crore to Indian banks. This news spread like wildfire, it questioned even the jurisdiction capabilities of the Indian Government on how easily justice could be evaded by crossing the nation’s border.
Kingfisher was established by the United Breweries Group, owned by Vijay Mallya. With its premium service, Kingfisher was then the toast of the aviation world, and the company did a commendable job till 2011 since its inception. It successfully captured a great customer base of around 1 million by 2009 and was enjoying a great reputation in the early 2010’s. It was around the year 2011, when everything started going downhill.
Lack of management on the part of Mallya had been a major reason for the decline of the company in the market. After acquiring fame in the liquor sector, he pursued to venture into airlines without any prior experience. And this inefficiency in management led him to take some wrong and poor decisions which turned the tables and opened the doors of struggles.
The acquisition of Air Deccan brought along many misfortunes in the form of losses. While the Deccan focused on mining the bottom of the pyramid, Kingfisher was picking the cream off the top. They had opposite ends of the business spectrum, consumer models and consumer space. In addition to this, Mallya was so eager to go with the deal that he and his officials did not even examine the Balance Sheet and books of Air Deccan.
Kingfisher Airlines soon decided to enter the International markets, which in turn proved to be a complete catastrophe. They faced stiff competition from big players like Emirates and Etihad. They dug their own grave, since they integrated their weakness of being inexperienced with the threats of increasing competition.
KFA flew 366 domestic and 28 international flights. It owned a total of 67 aircrafts and still, at the end of March 2011, was valued short at a negative net worth of Rs 3633 Crores.
One of the most crucial reasons for the failure of KFA was the lack of support, coordination and cooperation at the apex level of management. Delayed decisions, inconsistency in management, lack of service, etc. added more to KFA’s blotch. Mallya successfully managed the Breweries due to his good management, but every sector is not the same and in this, he failed to realize.
To keep up in the modern era, you need to be fluent with your marketing and branding techniques, keep track of the operations as well as keep your service costs in check. KFA failed to keep up with it’s timeline, leading many upcoming years to be filled with losses.
Presently, the company owes a total debt of over 7000 crores. The banks have refused to extend any further credit as the non-performing assets jeopardize the profitability and liquidity of the banks.
The company’s failure has left a learning experience for all the aspiring entrepreneurs. One should learn to correctly estimate the change in taste and preferences of the customer and cater to those needs which will satisfy them the most. Moreover, all sectors have their own significance and one can not rule everywhere if it rules one.