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Vijay Mallya, who calls himself "king of good times," is currently having a bad time as Kingfisher Airlines, owned by his UB Group, is on the brink of collapse amid surging fuel costs and cash constraints.
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Kingfisher, which is India's second-biggest airline by market share, lost 4.69 billion rupees ($93 million) for the second quarter, compared to a loss of 2.31 billion rupees in the same period last year. The airline has canceled more than 200 flights recently, triggering fears about its financial viability.
Many complained that Mallya's ruthless spending is responsible for the downfall of Kingfisher, which was named after the famous brand of Indian beer.
Mallya, 55, lives a flamboyant life and is often compared to Richard Branson as they have diversified businesses, owns formula one teams and run airlines. Mallya, apart from owning Kingfisher, co-owns the Formula One team, Force India, and the Indian Premier League team, Bangalore Royal Challengers.
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The king-size life of Mallya whose net worth, according to Forbes magazine, is more than $1 billion has mesmerized many Indians. No wonder, he has more than 706,000 followers on Twitter.
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Now, Mallya is in rough waters and needs some soul searching about his extravagance. The culprit is none other than the acquisition of Air Deccan that made Mallya a household name. Air Deccan became Kingfisher Airlines and soared to popularity due to its good services including good food, personal screens on domestic flights.
Kingfisher, which is yet to post profit on annual and total cost basis, became a prey to surging jet fuel costs, which as of Nov.11 stood at $133.4 a barrel. The airline also bore the brunt of price war due to severe competition and a falling rupee, which has made oil imports costlier.
All these issues have been affecting the entire industry, which is struggling to operate despite India's rapidly expanding economic growth and 20 percent annual rise in air travel. Kingfisher's woes have been tied to its low-cost airline Kingfisher Red, which it decided to end in September to focus on regular service.
In addition, Kingfisher pays more than 15 percent of its revenue towards interest payments due to its heavy debt load of $1.5 billion. Experts have said Kingfisher needs at least $150 million investment to continue its operations smoothly and have warned if Mallya tried to divert funds from his profitable UB Group, it would affect those businesses.
There were rumors of a government bailout. However, Mallya rebuffed the idea, saying he didn't need taxpayers' money. The Indian government shells out millions of dollar of money each year to Air India to keep it flying.
"why do you say "bail out" ? No bail out involving tax payers money. V want working capital management assistance. Why so sensational?," Mallya tweeted Nov.14. Instead, he sought Foreign Direct Investment (FDI) in Indian Airlines, lower tax and allow airlines to import fuel directly.
On Nov. 15, Mallya said he had been approached by a "large Indian investor" for a stake in the airlines and the airlines had appointed SBI Capital Markets to review the offer, according to Times of India.
Amid all these, Mallya is confident and has rubbished reports of shutting down the airline, saying it is "unfair to write its epitaph."
