STRATEGIC AND ETHICAL FAILURE OF

KINGFISHER AIRLINES

By
Satyakama Das (19PGPMWE49)
Sudhansu Sekhar Mishra (19PGPMWE58)
  Introduction

 Business Life Cycle

 Strategy – kingfisher

contents  Consequence

 Ethical Analysis

 Conclusion
  Kingfisher Airlines know as The King of Good Times.
 One of the fastest grown luxury Airlines in India having higher
brand values and became 2nd larger player in Indian Aviation
Industry after Indian Airlines.
 Vijay Mallya took over the business from his father i.e United
Breweries (UB) group hiving huge ambition and eager to expand
Introduction its existing business.
 Came to limelight after committing a financial crime of one of the
NPA asset at various Banks in India and move to UK without
paying the loan dues.
 Indian govt trying to extraditing him from UK.
 The story of transformation of most reputed glamorous
businessman to a criminal is as mentioned:-
  2005, started Kingfisher Airline Business.
 2007, acquired air decan which was a lower cost international Airlines.
 2008, King fisher airlines faced a loss of 934 Cr due to rise in oil price, change
of aviation policy by Govt and acquisition of financial unsold airlines.
 2009, the debt accumulate to 7000 Cr – SBI- 1600 Cr and IDBI bank - 900Cr.
 2010, Bank gives a timeline of 9 months for the repayment of $1.3 billion.
 2011, for non payment of tax 11 accounts of King fisher airlines were being
Business Life by IT dept.
 2012, King fisher airlines started canceling several flight and deducting
salaries of employees.
Cycle  2013, BGCA asks to clear all dues related including pending salaries of
employees.
 2014, UBI declared Mallya and 3 other directors as wilful defaulters.
 2016, Banks move supreme court to ban overseas travel of Mallya. Mallya
left India in 2nd march.
 Market Analysis

Rise of Fuel
Cost &
Acquisition of
ChangesOf
Air Decan
Aviation
Policies
Strategy – Strategic
Failures
kingfisher

Rise of Investment in
Excessive Debt Planes
  Launched premium business class airlines with-out proper
analysis.
Market Analysis  Lack of understanding of customer requirement.
 Stick to business in luxury airlines.
 Failed to differentiate customer of two different industries (Liquor
& Aviation) thought both customers having same behavior.
  After being renowned as luxurious airline plan to entry cheaper
market segment by acquiring Air-Decan international flying
rights.
Acquisition of  By several acquisition and hiring became largest Indian Airlines
with 27.5 % market share without remarkable profit due to
Air-Decan financial crisis and rise in oil price.
 Lost brand image of premium business class airline.
  At the end of 31st march, 2011 Kingfisher have 366 domestic flight, 28
international flight and 67 Air crafts.
Investment-
 Rental lease for aircraft and engine raised to 984 Cr from 2010-2011.
Planes  Where other players trying to reducing their flights to reduce cost.
 The above situation caused
Rise of excessive • Negative net-worth at Rs 3633.08 Cr up to 31st March, 2011.
• Loss of 1027.39 Cr in Dec, 2011 quarter.
Debt • Total debt of 7057.08 Cr and total accumulated loss of 6000 Cr.
Rise of Fuel Cost
 Fuel Expenditure was 2274 Cr in FY 2010-11 which was 28% of total cost.
& Ch. Of Aviation  Policy Change:- Rise of custom duty, Sale tax.

Policies
 • Made money laundering by framing on-paper
companies located in various countries like UK, USA,
France & Ireland with dummy directors and controlled
Money by self.
Laundering

Consequence • In march, 2016 Banks moved to supreme court for the

loan recovery of 9000 Cr from Vijay Mallay.
• In Apr, 2016 ED summoned Vijay Mallay to appear in
court and testify but he failed to do several times after
Proclaimed further notice from ED.
• Due to this termed as proclaimed offender.
offender
 Ethical Behavior for Director:-
As per companies act, the director of company should follow the duties as
mentioned:-
1. Act in good faith and in best interest of shareholders, environment,
community, members and employees.
Ethical
2. Exercise duties with reasonable care, skills, diligences and independent
Analysis judgements.
3. Does not involve in situation which lead to conflict with the interest of
company.
4. Not to wish unjustified self gains or for a person of his choice, if does
should be liable to a fine equal to the amount attended from gain or more.
 Unethical practice by Vijay Mallay

• Gave privilege to personal interest over the trust of share holders, employees
and investors by creating conflicts like hiding actual profit, business dealings.
Breaching • Though having 8 years loss, continued operation imitating shareholders and
Trust of customers with false values.
Shareholders • In 2012, failed to pay salaries of employees and 2013, though Diageo acquired
27% stake in United spirit for 6500 Cr not paid single lender and employee.
, employees • Invested money in IPL and making concerts with renounced celebrities like
and Investors singer Enrique Iglesias.
Ethical
Analysis • Serious fraud investigation office, India found ethical issues merger between
Kingfisher airlines and Decan Aviation.
Non disclosure • Created new airline departments to avoid capital gain tax.
of non • Non compete fee paid to Decan Aviation without disclosing to shareholders.
compete • Non transparency in disclosure of information to shareholders for making
clause inform decisions
• Little cares to shareholders, employees and customers.
Power • In 2010, selected as MP of Rajya Sabha and used position for personal gain.
• Put his position in civil aviation committee to speed up approval of FDI into
aviation sector. So that foreign investor could invest in his airlines.
Misus • Discuss informally with finance minister for convincing the banks to settle
with king fissure airlines.
e • Request was denied by FM and Mallay left the country.
  Kingfisher airlines which established itself as a highly service oriented
airlines with several hours and recognition for its outstanding services but
trapped by failing to differentiate customers of Aviation and Breweries.
 Also considered as a pioneer airline business in India became failure
because of strategy adopted in consistent decisions and gave privilege to
personal interest over the betterment of company business and stake holder
Conclusion values.
 Major decisions were taken without proper forecasting and in haphazard
manner.
 All these steps stimulate to do unethical practices to have profit in business
and leads to make him proclaimed offender from once most talked
businessman and icon to follow by Entrepreneurs.
THANK YOU