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What was the reason behind the downfall of Kingfisher

reason of downfall of kingfisher
reason of downfall of kingfisher

Reason behind the downfall of Kingfisher

Just take a minute and think what makes a company successful? According to survey report, almost half of the new company launched go out of the business within four years. But what’s the reason behind? We will try to understand by taking an example of Bankrupted Indian tycoon Vijay malya’s airlines Kingfisher and will try to get the reason behind the downfall of Kingfisher.

It’s very hard to pinpoint the exact decisions or reason which causes the failure of a company. However, it’s possible to trace some of the roots which led to the eventual demise or the downfall of the company.

A very illustrious splendid business man, Vijay Mallya launched his high-end airlines company with the name Kingfisher in 2003. Initially, Kingfisher was full of potential, poised on the brink of eternal profit. Yet, today, it can be barely seen under mountains of metaphorical ruins and shambles.

What went wrong?

The fact that caused to drown of Kingfisher Airline is common knowledge. However, not all the people are known to the story of the once mighty airline company kingfisher which deserves to have its story told, even if it is used as a cautionary tale for other upcoming airline companies.

Kingfisher was established in 2003 under the Chairman Vijay Mallya. As kingfisher’s parent company United Breweries, had a stellar track record and people expected no less from its fledgling. But, Unfortunately, the reality was slightly different.

Sadly, reality was slightly different. The god had some other plans for Kingfisher. In 2005, The company started its domestic services with four Airbus carriers. It’s first flight was between Mumbai and Delhi. After 3 years of it’s potential operations in 2008, kingfisher started providing international services with a direct flight between Bengaluru and London. Now, the story of gradual downfall of the company begins. In all fairness, Mallya tried out a lot of different approaches to overcome this looses. In retrospect, perhaps this was where their problem lay.

Kingfisher was initially launched as an economy airline. Barely a year later, the kingfisher suddenly changed it’s track and shifted to luxury. Soon after that, in 2007, Kingfisher acquired the Bangalore based airline company Air Deccan which was proved as blundered mistake that is ultimately believed to have brought the company down.

A lot of experts are of the opinion that the decision to merge kingfisher with Air Deccan was driven by the desire to launch international operations in 2008. After the merger, Kingfisher had a fleet of over 71 aircrafts, with a combined experience of five years in the domestic market. These facts enabled the company to meet the requirements for international flying.

The initial plan with the merger was to save about Rs. 300 crore. Instead, Kingfisher ended up spending almost Rs. 500 crore on a company which already had losses of over Rs. 550 crore. In fact, over the next three years, Kingfisher accrued a loss of over Rs. 1,000 crore!

The company never really tried to manage it’s losses. In fact, the amount of debt kept increasing each year it remained in operation with the same way.

It all went downhill from there. And now In 2011, Mallya decided to exit the low cost business. This decision came a little too late however, as the company was already facing a debt of about Rs. 6,500 crore by then.

The situation went from bad to worse.

By 2012, the employees started going on strike for non-payment of salaries. In the face of the ever-increasing debt of Rs. 7,000 crore, the company suspended all international operations. They also reduced their domestic operations significantly.

Well, that is exactly what happened to Kingfisher.

Eventually, the debt reached such an unimaginable size, the company was forced to declare bankruptcy. Kingfisher was declared a non-performing asset by the consortium of banks headed by the State Bank of India (SBI). And it was 2012, when the Directorate General of Civil Aviation suspended the company’s license.

In fact, in 2014, The prestigious Kingfisher House, valued at over Rs. 100 crore, was seized by a consortium of 17 banks headed by SBI, in an effort to recover some of the assets.

Kingfisher was completely eviscerated and reabsorbed by the earth. Vijay Mallya fled to London in the face of criminal charges for the non-payment of the staggering amount of debt the company accumulated. “I am in forced exile with no plans to return to India,” said Mallya.