The unprecedented floods in Chennai last year had led to a complete shutdown of the city airport. Such was the deluge that jets were swept away from their parking bays.
As worried companies and owners rushed to assess damages, none turned up from the erstwhile Kingfisher Airlines (KFA) to inquire as to what was left of their seven ATR aircraft parked in one remote corner of the airport.
The seven ATRs were once part of KFA’s fleet of 66 planes that ruled Indian skies.
Launched with much fanfare by its flamboyant chairman Vijay Mallya, Kingfisher Airlines was said to be the liquor baron’s gift to his son Siddharth on his 18th birthday. In 2005, when Kingfisher was launched, the air hostesses were compared with ramp models and the hospitality was decidedly five-star. Chairman Mallya appeared himself in video announcements on board to announce that each passenger was like a personal guest for him.
The airline grew rapidly. Mallya acquired Air Deccan from Captain GR Gopinath in 2008 and renamed it Kingfisher Red. While the acquisition helped Kingfisher to bypass the government’s controversial five-year rule to fly overseas, much of KFA’s debt came from the acquisition of the no-frills carrier.
There was, however, no stopping Mallya as he went on to place orders for the superjumbo A380s, A350s and A320s. The airline’s network grew to 366 domestic and 28 international flights.
However, the global financial crisis and rising oil prices were taking a toll on Kingfisher and other Indian carriers. Even as Kingfisher gained market share, things were slowly slipping out of Mallya’s hands. Kingfisher had started defaulting on payments.
The billionaire liquor baron, who owned a Formula One motor racing team, a cricket team in the cash-rich Indian Premier League and other lifestyle assets, was incurring the wrath of lessors, suppliers, lenders, employees, airport operators and tax officials.
On September 28, 2011, Mallya announced shutting down of Kingfisher Red.
“Mallya was caught between the ambition to make KFA India’s biggest airline on one side and financial mismanagement on the other,” said a former senior executive of KFA. Mallya, instead of appointing a full-time CEO, decided to run the airline on his own. But, aviation, as experts said, is unlike any other business – very challenging and cost intensive. “The absence of a dedicated, seasoned airline CEO hurt KFA,” said another former Kingfisher official.
KFA never made profits since its inception in 2005.
The airline had the third-largest fleet among Indian carriers and was the second biggest in terms of market share in July 2011. However, Mallya’s problems were rising by the day.
“The KFA crisis started from the time they took over Air Deccan, a loss-making venture. Lack of a clear policy hurt the airline,” he said. Ailing KFA’s accumulated losses at the end of the financial year 2011-12 were more than 50% of its net worth.
The cash-strapped airline reportedly defaulted on lease rentals of around R1,000 crore, forcing lessors to take back 34 of its aircraft in the first half of 2012. The airline denied this and said it had voluntarily returned all the aircraft. Another 15 aircraft were grounded due to want of spares. Failure to make pre-delivery payments led ATR to cancel an order for 38 turboprop planes.
Mallya tried everything he could from lobbying with the government to allow foreign airlines to invest in Indian carriers to negotiating with banks for fresh loans, but failed miserably.
On February 4, 2012, KFA’s entry into oneworld – a global airline alliance – was put on hold. The airline soon discontinued its international operations.
“Mallya, a Member of Parliament, famous for his extraordinarily expensive lifestyle, has driven this airline to bankruptcy by sheer mismanagement and bad financial planning,” a group of prominent citizens had said in a letter to the then Prime Minister Manmohan Singh on February 27, 2012, asking him to ensure that none of the state-owned banks extend any further loans to KFA.
KFA’s market share had fallen to 3.2% by August 2012 from a high of 19% in July 2011, making it the smallest domestic carrier in India. It finally stopped operations in October 2012.
Kingfisher had only a handful of planes in operational condition when it shut down. Lessors had taken away a majority of planes while those that had been left behind were taken away after the Directorate General of Civil Aviation de-registered them.
Apart from the seven ATRs in Chennai, two ATRs and Mallya’s corporate jet– an Airbus A319 – are parked in Delhi and Mumbai, respectively.
The central excise department had attached the 10 airplanes and will auction them in May through state-owned MSTC Ltd in an attempt to recover its pending dues.
“Nothing much remains of these planes. Most of the aircraft parts had been cannibalised as the airline somehow managed to keep some planes in a flying condition. What remains of some of these planes is basically the hull as doors, engines and other parts are missing from many of them,” said a senior Airport Authority of India (AAI) official, who did not wish to be named.
Like other lenders and business partners, excise officials are aware that the planes or rather what remains of them are unlikely to fetch them even 10% of their pending dues. “As these planes have not been maintained over the last few years, they have been reduced to nothing but pieces of junk,” said an excise official.