Boom and bust of Kingfisher airlines

Vijay Mallya, 60 year old Indian businessman and politician who owned India’s biggest liquor company and a private jet, an Airbus, and launched Kingfisher an airline to match his style and flamboyance. Kingfisher went from boom to bust. Lalit Modi, their ownership of IPL teams and jet setting lifestyles. Mallya made his escape to London recently, as creditors and unpaid employed and the media were searching and many believe that they have allegedly made off with unaccountable millions. He milked the banks to support his lifestyle. We under stand the loan money is £400m and the rest is interest but the banks kept on lending him money to evergreen his loans.

In 2006, IDBI Bank at Mumbai, got a proposal from Kingfisher Airlines, seeking funds to acquire aircraft, from Vijay Mallya. Who had launched the airline only the previous year. He bought Shaw Wallace, one of the oldest liquor manufacturers in India for £130m * (Rs1,300 crore) from the chhabria family after the death of his arch rival, Manu Chhabria in 2002, he also struck a deal with British beer manufacturer Scottish and Newcastle which had brought a 37.5 per cent stake in Mallua’s United Breweries Ltd for £94m ( Rs940 crore). Since IDBI had encountered an earlier lending problems while dealing with Mallya after his acquisition of Mangalore Chemicals and Fertilizers, they did not approve the proposal. But a few years later in 2009, the bank provided a loan of £90m (Rs 900 crore) to Kingfisher.

Mallya, despite high crude oil prices, fuel costs making up half the operating costs of airlines, announced his premium world-class airline and became the second largest airline in India, went on to acquire Air Deccan in 2007. With the groups holding company United Breweries Ltd paying £55m (Rs 550crore) to buy 26 per cent stake in the low-cost carrier. The Deccan acquisition allowed Kingfisher to fly internationally (airline rules in India requires carriers to complete five years of operation and have 20 aircraft before they can venture internationally). In September 2008, three years after Kingfisher first took to the skies, the airline launched its Bengaluru-London flight. By end of Mardh 2008, Kingfisher’s debt had mounted to £93.4m (Rs934crore) and a year later it escalated to £566.5m (Rs5665crore) , with net losses of £18m in 2007-08 and £160m in the following year. By 2009, Kingfisher Airlines had accumulated a debt of over £700m and continue it losses.

In 2013, when a consortium of 14 banks led by the SBI approached UBJHL for payment of what then an outstanding sum of £649m in loans to Kingfisher Airlines.

United Bank of India was the first lender to declare Kingfisher and Mallya a ‘wilful defaulter’ in May 2014, followed by SBI and Punjab National Bank.

Mallya is currently fighting at least 27 cases in various courts in India, of which 22 are related to loan default by Kingfisher Airlines, as the amount stoo at £909m at the end of November 2015.

According to a close aide of Mallya “he never thought Kingfisher would shut for good as he kept thinking it could be revived. I have seen him try really hard to get the airline back on its feet. In the end, Kingfisher was run very badly resulting in a mess”.

What Kingfisher owes

No	Bank Name	Amount in £ million	Amount in Rs Crores
1	SBI	160	1600
2	IDBI	80	800
3	PNB	80	800
4	Bank of India	65	650
5	Bank of Baroda	55	550
6	United Bank of India	43	430
7	Central Bank	41	410
8	UCO	32	320
9	Corporation Bank	31	310
10	State Bank of Mysore	15	150
11	Indian Overseas Bank	14	140
12	Federal Bank	9	90
13	Punjab & Sind bank	6	60
14	Axis Bank	5	50
15	3 other banks	60.3	603
	Total	696.3	6, 963