Kingfisher Airlines, the second biggest carrier in India, was denied a public bailout today by Civil Aviation Minister Vayalar Ravi. It may finally spell doom for the struggling airline, barring a major intervention by investors, reports Reuters.
Kingfisher has been stumbling along for years now, and Veritas Invest went so far as to deem Kingfisher “a bankrupt organisation.” Its inability to keep up with fuel costs forced the airline to cancel more than 200 flights in the past week, and its pilots are running for the hills.
So, how did it end up like this?
Vijay Mallya, the beer tycoon that runs it, blames its problems on the “high-tax” and “hostile” environment, and that the “entire industry is in serious trouble,” according to Vikas Bajaj at the New York Times.
These are absolutely valid points, but it’s impossible to ignore how the company has been mismanaged, too.
Its acquisition of Air Deccan — Kingfisher tried to get into the low-budget game when it bought the airline, and rebranded it Kingfisher Red, in 2008. It bombed, and Kingfisher decided a couple months ago to discontinue the discount service.
It dug itself into a huge pit of debt — The airline’s interest costs are through the roof, and it’s gutting the company. Bajaj reports that 20% of its revenue is spent on interest, compared to the 6.5% that Jet Airways, the largest airline in India, spends.
Operational inefficiencies keep piling up — The Kingfisher fleet is made up of lots of different planes, and earlier this year it had to ground some planes because it didn’t have the cash to maintain them. A stark contrast is India’s most profitable airline, Indigo, which uses a Southwest Airlines-esque operational model to keep maintenance costs as low as it can.
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