A series of poor business decisions such as aping the rival in aviation market and acquiring Air Deccan to circumvent the then prevailing laws for flying abroad, were among the prime reasons that led to the crash landing of Kingfisher Airlines.
According to a Bengaluru-based aviation analyst Devesh Agarwal, Vijay Mallaya-promoted Kingfisher kick-started well by offering 'premium- all economy' service with its in-flight system, great cuisine, gift voucher, etc and was a run-away hit as the domestic aviation market expanded. But subsequently, the airline got into 'me-too' mode despite being in a strong position and started aping Jet Airways in everything it did. "The first mistake KFA did was the introduction of business premium, which was almost a first-class. Thereafter, they took several other similar decisions like the choice of aircraft fleet, etc, thereby drifting away from its original business plan," said Agarwal.
The experts claim that another thing which went against KFA was that it did not have a senior leadership having strong domain expertise in the business unlike its rivals.
"The fact is at that point of time there were not many people with such domain knowledge available in India. So almost all airlines which are successful today had to import it from foreign countries. But KFA did not," added Agarwal.
Jitendra Bhargava, former Air India executive director and author of book 'The Descent of Air India', echoes a similar view. "Though Kingfisher Airline was India's finest airline, what led to its downfall was Mallya's over-ambition. He made some cardinal mistakes like acquiring Air Deccan (in order to circumvent the 5/20 rules) and growing fleet too fast without caring about normal business practice wherein cost can't exceed the revenue. Coming from (liquor) business where the margins are as high as 200%, he forgot that he was running an airline which has wafer-thin margin of about 2% in the best of time," said Bhargava.
The analyst tracking the sector reiterate that any businessman would have taken a note of the mounting losses, but Mallya didn't because he kept getting more and more loans without caring to pay for the earlier ones. "This gave him false impression that there will be constant stream of money flow and thereby he accumulated huge losses" says Bhargava.
Mallya, in a series of tweets earlier in January, after the Securities and Exchange Board of India had barred him from trading in securities, said that the government had bailed out Air India but not KFA. Claiming that his now-defunct airline was the worst hit despite being the largest and finest in the domestic sector then, Mallya added he had begged the government for help, not in terms of loans but in making some policy changes such as giving goods status for aviation fuel and flat rate of state sales tax instead of ad valorem on it.
