Son of Vittal Mallya and his second wife, Vijay Mallya who didn’t have anything till the age of 25, suddenly became the owner of Rs 19,000 crore empire, after the demise of his father.  He assumed the responsibility of the family business in 1983, becoming the chairman of United Breweries Group.  Known for his flamboyant image, in 2003, Mr. Mallya established the Kingfisher Airlines, with its first flight taking off in 2005.  With its luxurious furnishing and interiors and lavish catering and hospitality service, Kingfisher was India’s most premium airline at that time, offering a world-class experience to the passengers. However, this luxurious adventure couldn’t last longer owing to the mistakes committed by company management and local & international business climate.  To understand the prime causes of the dramatic failure of Kingfisher Airlines, let us discuss the given 3 points as mentioned below:  # **1. Mismanagement Turned into a Scam:** The main reason for the debacle of kingfisher Airlines mismanagement turned out to be the major business scandal.  Unlike Kingfisher, Satyam was an outright scam since its inception, which later turned into mismanagement. But, Kingfisher was the repercussion of widespread mismanagement, later becoming a scandal.  Satyam, since its beginning, was involved in corruption, culminating into mind-blowing mismanagement. On the other hand, although Kingfisher was not corrupt in starting, it turned into a scam due to its inability to handling the company. Kingfisher failed as it did not have:   ► Long term strategy  ► Execution strategy ► Full-time management professionals  ► Sustainable business model Other incidences of mismanagement in Kingfisher Airlines were: ► Flying on all non-profitable routes ► Due to weak business model, no one came in their rescue  ► Multiple types of fleet ► Multiple types of aircraft ► Multiple types of seating arrangement _**Lesson:**_  In the same business climate Indigo Airlines proved to be a success story, unlike Kingfisher, as Indigo had: ► Standardized fleet ► Standardized seating plan ► Standardized aircraft ► Standardized operation  ► Low-cost model and premium model # **2. Mistake of Acquisition and Expansion:** Two major reasons for the disaster of Kingfisher Airlines were acquiring Deccan Airlines and ill-planned international expansion.  **Acquisition:** ► The major blunder that Kingfisher Airlines committed was acquiring Deccan airlines, which was already running in huge loss.  ► Unmindful acquisition of Deccan Airlines for Rs 550 crore when Kingfisher was already in the loss of $1 billion  ► Renaming of Deccan Airlines as “Kingfisher Red” spread mixed signals among customers as it competed with its parent brand- Kingfisher Airlines.  ► Blur branding between both Airline services infused confusion in the market.  **Expansion:**  Kingfisher Airlines went on expanding its legs in the internal sky without a well-structured strategy, starting its first flight from Bangalore to London in September 2008. ► International expansion was another significant reason for the failure of Kingfisher.  ► At the international level, there is high competition, low and high investment. _**Lesson**__:_  Already running in loss, without having enough liquidity, profitability, reserves, and surplus for repaying loans, Kingfisher Airlines didn’t stop acquiring and expanding business only to end up being insolvent.  # **3. Fast Cash and Low Profit was Misunderstood:** Although in a real estate business money/cash comes in delayed intervals, margin is as high as 15%-20%, whereas in the small grocery business, despite cash comes daily, the margin is merely 4%-5%.  Similarly, in airlines business, cash inflow seems to be very fast, but the actual profit is unexpectedly low.  **Business climate**: In India, most of the airlines are running in loss because Airlines business is highly dependent on the international and local business environment.  As such, it is already difficult to make Airlines business profitable in India because of the un-conducive business environment, and on top of that mismanagement makes it even worst, which is what happened in Kingfisher.  **Business model**:  Along with the external environment, business model inside your company is also a critical factor in business. When external business environment is not conducive, then you have to give special focus on business model.  _**Lesson:**_ The business climate was similar for Indigo Airlines, but it focused on building a sustainable business model, operations and excellence. Indigo worked on increasing sales and reducing costs.  On the other side, when Kingfishers was busy in on expanding and acquiring, in 2008, Lehman Brothers, the 4th largest investment in the United States, went bankrupt, sparking global economic slowdown.  It turned the business climate in India no better than worst as Rupee value depreciated steeply against the dollar, and fuel prices skyrocketed. Since in airlines business 50% cost is incurred on fuel, Kingfishers continued taking debt from banks and petroleum companies, only to be declared bankrupt with debt overburden of Rs 9,000 crore. # **Introduction** The Kingfisher Airlines, once India’s 2nd largest Airlines, witnessed dramatic downfall as never before in Indian Airlines history.  In the follow up to the first part of “why did Kingfisher fail”, we are going to discuss the 3 more major reasons for the failure of Kingfisher Airlines.  # **1. Lack Of Trust with the Internal Manpower:** Building a high-performance team is the prime responsibility of a business owner, which Mr. Vijay Mallya, owner of the Kingfisher Airlines failed drastically.  He couldn’t engage his employees and could not build trust among them, leading Airline’s fate towards the dramatic downfall. # **Managerial Mismanagement**  Top performing employees are those who leave the organization when mismanagement and mistrust sweep the organization during the financial crisis. Kingfisher did the same with its performing team, who left the company during crisis. The only people who stay with organization are non-performers who multiply to the downfall of company. #### ► **No right sizing**:   The number of manpower employed against number of roles available was highly disproportionate.  In Kingfisher, there were 4000 employees, while only 7-12 aircraft were operational. #### ► **No Right Practice**:  Neither employees were given timely payment, nor were they formally asked to resign even when company was unable to pay their salary. Employees were not given salary for more than 24 months. Not only employees were ill-treated but they resorted to committee suicide.   # **2. The Brand Equity Was Favorable For Breweries Not For The Airlines:** Unquestionably, to a greater extent, Vijay Mallya’s flamboyant persona was a success factor for his breweries business, but it couldn’t prove to be so for serious business like Airlines.   Although, initially, his flamboyant image helped the brand (Kingfisher) attract consumer base by building an aspirational value, but the same image turned into a factor for its disastrous exit from the industry.  #### **No Effect on Breweries business:**  The reason why Mallya’s breweries business didn’t witness any fluctuation during financial crisis in Airlines business was majorly due to difference in the psychographics of the target audience of both businesses.  Flamboyant brand image may be suitable for breweries business, but in serious business like Airlines, such brand equity is disastrous for long term.  #### **Flamboyant Brand Equity:** Mallya developed his playboy image consciously, which built an aspirational value among people for luxurious services he offered. It pulled people towards India’s first most premium and luxurious Airlines.  The things exaggerating his extravaganza were: ► He purchased 26 properties all over the world. ► He launched his Formula One racing team ► He opened a private museum of his vintage cars ► He brought 165 feet Edwardian Yacht from Elizabeth Taylor ► Bought islands in Monte Carlo and Lakshadweep  However, his flamboyant image didn’t help him during difficult times as mismanagement in Airlines turned people against him, and business started tumbling.  The atmosphere in country kept on surging against Vijay Mallya and Kingfisher.  Had he developed a socially responsible image, people had helped him in crisis.              # **3.  Power of Member of Parliament, Easy Money, Undue Expansion:** Thanks to the political power of Vijay Mallya as being a member of parliament, Kingfisher Airlines, despite of having negative credit raging and being a loss making company, it was successful in taking loan from banks. A common person cannot get loan more than his eligibility, but Vijay mallya went on taking loans by showing false and fictitious eligibility. The loans of Rs 9000 crores that Vijay Mallya took from 17 banks are as Follow: SBI: 1600 cr                                                                 PNB: 800 cr IDBI: 800 cr                                                                  Bank of India: 650 cr Bank of Baroda: cr                                                     United Bank of India: 550 cr Central Bank: 410 cr                                                  UCO Bank: 320 cr Corporation Bank: 310 cr                                          State Bank of Mysore: 150 cr Indian Overseas Bank: 140 cr                                   Federal bank: 90 cr Punjab & Sindh Bank: 60 cr                                       Axis Bank: 50 cr **SBI’s Forensic Audit on Vijay Mallya’s Business:**  As per SBI’s Forensic Audit report, Vijay Mallya opened many dubious companies in Mauritius with the same address.  In the name of these subsidiary companies, Mallya took the mammoth amount of loan saying that he has taken aircraft on lease from Mauritius on rent. He took a loan of the double amount that he had to pay for aircraft misleadingly. **For Example:**  if a person takes the loan of Rs 200 for paying aircraft rent of Rs 200. But, he pays only Rs 100 and shows invoice of Rs 200. That means he is showing invoice of double amount that he actually paid and misusing the amount saved. Mallya, used to do the same by sending double amount to Mauritius by over-invoicing. Mauritius is the number 1 country for tax invasion in the world. The extra money that was sent through invoicing was actually being flushed out of there, preparing to flee from India.  From there the saved money was disbursed to many unknown places which are still investigated by CBI.  #### **Collateral Security:** Surprisingly, the assets that were given on collateral security were like ticket printing machine and pushback tractor which had no value against the amount of loan he had taken.  #### **Vicious Circle of Re-financing Loan Defaulted:** The 17 public sector banks that had given loans to Mallya, will be re-financed by the government from taxpayers’ money.  And this circle goes on and on.  #### **Loss to the Country:** The Kingfisher Airlines had the widest connectivity in the country. Kingfisher arrived in every city where no other airlines wanted to operate.  But the disaster of Kingfisher is not only a major loss of a businessman but Indian economy, because fast connectivity plays vital role in the growth of business and the country.