Vijay Mallay is a very wealthy man. He inherited a fortune (which is always a good place to start) in 1983 and since then has turned the original beer company into a wide-ranging, multinational conglomerate, although the core business remains Kingfisher Beer. A race fan from early on, Mallya had the money to play at being a racer driver in the early 1980s, which is where he met Bob Fearnley, now the deputy team principal of Force India. Fearnley was a racer-mechanic who went on to become a team manager, best known for his association with Scotsman Jim Crawford, which resulted in victory in the last British F1 championship in 1982, with an AMCO-sponsored Ensign. This car later went out to India where Mallya used it in1982 and 1983 to win a trio of races in Madras and Calcutta, although the opposition was not up to much. Fearnley worked with Crawford in CanAm after that and eventually moved on to the Indianapolis 500, where Crawford regularly qualified well. Kingfisher first became a Formula 1 sponsor with Benetton in 1996 but it then disappeared and was not seen again until 2007 when Mallya sponsored Panasonic Toyota Racing. That year he was approached by the Mol Family from Holland, shareholders in the Spyker team, who wanted a new partner. Mallya saw the opportunity to not only use the team to advertise his products, but also to raise his own profile in India. Thus Force India was born. Most of the team’s sponsorship is in-house with the Mallya-owned Whyte & Mackay, Vladivar and Royal Challenge liquor brands and Kingfisher Airlines. The only commercial sponsor is Medion computers, a deal that has long been associated with Adrian Sutil.
But while alcohol sales are going well, the aviation business is not good – at least not for Kingfisher Airlines.
The airline has a fleet of 66 planes and around 19.5 percent of the Indian market, behind Jet Airways and just ahead of rival Indigo. However the firm lost $147 million in the nine months ending in December last year. It has debts of $1.6 billion, but hopes to cut this to $1.3 billion with a $350 million rights issue, although the company share price has been falling dramatically of late, down to 39 Rupees from 71 in December, which means that raising more money is not easy.
The company has been in trouble over the non-payment of fuel bills, landing fees, service charges and even the airplane leases.
Back in the boom years before the current recession the company had orders of up to 130 planes from Airbus, with a further 25 options. The company was due to add 10 planes in 2012, 12 in 2013, 13 in 2014, 18 in 2015 and 14 in 2016. It has already deferred delivery of a number of them and is now seeking to get rid of some of them, officially because it is becoming a member of the Oneworld alliance, which has become involved as it wants to get a foothold in the domestic market in India.
There was a time when the aviation business in India was seen as a virtually guaranteed way of making money, with a fast-developing Indian middle class ready for international travel. Mallya set up the Kingfisher Airline in because it seemed to offer the opportunity to make money and, it has been argued, because it would as advertising for the beer company. Alcohol advertising is banned in India, except at the point of sale. As a result the alcohol companies have long used indirect methods of promotion, including clothing brands, mineral waters, sports and so on. Mallya, for example, also owns a cricket team known as the Bangalore Royal Challengers. He owns a liquor brand called “Royal Challenge“.
One can only hope that Mallya’s troubles in the aviation business will not impact on his racing team.
joeblogsf1 
Kingfisher enjoyed $5.27 million worth of exposure from the 2009 Belgian Grand Prix alone, according to brand watchdogs.
Let’s hope the airline doesn’t drag the team down.
The only thing that can bleed you dry of money faster than F1 is an Airline!
As you say, hopefully one wont impact on the other.
Its a pretty wide ranging business when you think about it, from the pint with your Jalfraze to sticking your name on the back end of an A320!
Running an airline in todays market would be enough to give you grey hair……oh it already has !
Altogether now: “The best way to make a small fortune in motor racing is…”
That is very interesting Joe, quite different from some other assessments of VJ where some others have said he knows notihng about F1 or racing, only buying and selling companies.
Looks like he may want to loose a couple of pounds to fit in a race car nowadays though. (don’t we all though?) Still the “Brundell bros” did ok in the Daytona 24 and they are at commentator weight now rather F1 driver. Makes you wonder how Ant would have gone in the came car, half the weight.
The oil price affects airlines far more than a lot of other sectors so it is not good news for VJ (nor for Tony or Richard) as the middle east erupts the oil price will keep rising.
What’s the interest rate in India? The debt servicing must be taking an appreciable chunk out of the overall margin. Of course scrip issues do not really help in the short term unless they are large enough to pay off the debt, then the share dilution obviously drops the share price as it has done here.
This is something Williams are going to experience shortly in their erroneous floatation of a quarter approx of their shares, this leaves them extremely exposed. I suggest people look up what happened to the shorters (mostly hedge funds) when VW was looking dodgy and got shorted, not too long back. The participants did not know that Porsche had bought a huge wad of VW shares and created a shortage, thus the price became highly volatile, and dropped quickly making the shorters some money but leaving them owing the shares they had borrowed, when the news broke, the shorters had to buy shares to give back, but the price went up like a rocket as they piled in accelerating the price rise. This was a classic case of a come-uppance for the hedge funds, but the point I am making is that when only a small percentage of a company’s shares are available on the market they react violently to much smaller buy or sell transactions, which then affects the company’s total value.
Starting about ’83, or ’79 if you consider Volker’s rate float decision vital, has been nigh 30 years of savings erosion, equity inflation and currency devaluation, though that latter stated to combat OPEC and as a byproduct created the thriving European bond market which migrated to London from Luxembourg. (whatever your view on that, it kept us on the map and was a good bounce in dire times)
We can all make mistakes, but from a good start it’s hard to think of a more favourable set of conditions for someone who inherits capital. I would have said “benign”, but that is far too weak.
Who can name the airlines which have NOT wiped out their investors, time and time again? Mr Ryan, Mr Haji-Ioannou come to mind, but also as cannibals with a friendly efficiency smile. Not arguing against efficiency, nor their rewards, but i feel they’ve changed the face of airtravel in one way: all the their competitors are becoming just as awful. I’m thinking about BA stripping in flight meals on short haul EU routes. Yeah, that was onetime the only moment i got for lunch, thank you. I’ll come to the other possible candidate . .
Airlines are very funny business. If you’ve been around, you’ll likely know someone who personally got a settlement payment from BA, for stiffing Laker and pushing up the fares. (Laker won a vast settlement, Maggie called the Gipper and got it reversed) So Branson, in the one move I totally rate him for, got Laker in at the start with Virgin Atlantic. But there’s little idea as to whether they make money on the investment, or just make enough money to be okay.
Hopefully Oneworld will help Mallaya, particularly on parts and servicing costs. The rest depends on interchange fees for connected flights, and i’d not be surprised if a tough deal was asked of him, and yet again, there’s a monopolistic system to get those fares through.* But i’ve not yet seen Kingfisher codes on my desk application, and personally, if i have to go by there, i’ll be asking for a different transfer.
I find the whole advertising ban circumvention thing distateful, though i am not against a good drink or quality smoke. I’m set in my ways, I’ve always had problems with consumer ads, and make me dictator for the day, you’d see them largely disappear. I say largely, because with omnipresent consumerism across all social strata, bombardment is disrupting normal communication. I would argue this because the industries which use these channels ultimately do themselves disservice. There is sufficient enough problem in so called mass media “editorial”, that new ways need to be thought of. Aside, what was the percent of UK adspend from central offices lately? The information office (hmm, sound familiar from history?) won ad industry awards, for heaven’s sake. Ugh.
There doesn’t seem much depth to VJM’s plans, and maybe that explains his capriciousness.
– j
*This is as good as it gets, for explanation of fun with fares:
Click to access ITA-software-travel-complexity.pdf
p.s. RIP Riaz Dooley, a pioneering bucket shop operator I knew, who got blackballed the minute they saw his threat and found a means.
p.p.s.
My pointed mention of Laker can be explained in two words:
Berlin Airlift.
(his start, check it out)
– j
…”The company has been in trouble over the non-payment of fuel bills, landing fees, service charges and even the airplane leases.”
Haven’t we heard some similiar allegations about FI?
These are facts.
Joe excellent write up, aviation business is prolly the worst place to make money cause of tough regulations. but shareholders are looking forward to Sanjay Aggarwal who is the newly appointed CEO. their problems are so far covered as other business of the groups are doing well. But most people know that funding an loss making airlines beyond a point is not sustainable. had advertising of alcohol not been banned i’m sure Mallya would not have gone ahead with this business.
Indeed one can only hope…………..!
John (Other John)
Your link to http://www.demarcken.org/carl/papers/ITA-software-travel-complexity/ITA-software-travel-complexity.pdf was very interesting, though I have to admit I ran out of steam about halfway through.
It did however remind me of my old boss and one incident in particular. We used to do a lot of business with motor car manufacturers (more assemblers actually) in South Africa, our MD (who ran the company as if it was a sole tradership, though actually a plc) had a house in Cape Town which he was having renovated and re-decorated. He was a consummate player of airline tickets and never went any trip with less than 3 tickets, his secretary spent at least half her time planning and constantly changing his ticketing mostly using RTWs wherever possible, since at that time they were the cheapest, though rarely did they go exactly where he wanted, so many additional north/south trips were added plus some jumps back, extra RTWs starting halfway etc. On this occasion I had drawn the short straw, usually because he wanted to tell me how to do my job better all the way to the airport, and at Gatwick we arrived at the BA business class check-in with the normal two very large suitcases each for him and his wife. Plus two extra extremely heavy trolleys containing 5 bolts of high quality cloth which was to be made into new curtains in SA. The poor BA girl didn’t know what hit her. Two people going different routes, (+plus servant, me, with 2 additional trolleys) overweight bags, extra airfreight, 8 tickets 4 of which were RTWs which had been part used, half had been bought in SA. The confusion created and stress level was raised to such an extent, that that to my amazement, instead of charging several hundred pounds for the excess baggage, a door was opened I was beckoned and the bolts of cloth got labelled and wheeled straight through, no weighing, no charge as did the bags; I’m sure someone got a telling off later, but they were more than happy to be rid. (he used to have that effect on a lot of us)
Slightly off topic, but I visited Mallya’s car collection recently and I think this is the Ensign car that you are talking about
http://desinole.zenfolio.com/p341191150#h29eca8c2
Although the sponsor signs are slightly off, the info next to the car said something along the lines of “Mallya raced this car in India”.
I looked for information on those races and could never find it, but Karun Chandhok had put up a few pics on his twitter account and that is all I know about them.
Just thought it was interesting.
@Joe – Thanks for the informative article, pretty much corroborates, with all my speculative posts on this blog regarding Mallya and FIF1 venture. Hope some day you write something about his involvement in governance of Indian Motor sports and resulting (side)effects on long term future of Motor Sports in India.
@ Karthik – Thanks for sharing the photos. And then imagine this guy is repeat offender when it comes to paying his service providers. Embarrassing…
Paper billionaires in trouble? Change Richard Branson for VJ and you have the same story. These types are great at promoting themselves, but often sail very close to the wind when it comes to solvency. Richard’s book(s) often allude to how close he came. It is part of their brand to be seen as wealthy.
Any news on Liuzzi settlements?
Neo,
I have not heard of anything
Adrian Newey Jr,
paper billionaires all, yes.
Minoru Mori, who inherited an estate in Tokyo the Duke of Devonshire would envy, nay might wilt at the sight of, no less in the 80’s boom said, “the land is worthless, but the richest man is who has the most cash” [sic]. (Forbes had that quote in about ’86)
See how much grace they each have under pressure.
and i’ve spent my career being rather nonplussed by Branson’s “branding” efforts, which are mostly poor in the extreme.
But, as you might have suggested, put one against the other: i think no contest.
Branson has survived by keeping almost everything private, and funneling money from one to the other. ‘least it’s his money.
Anyone heard of Branson stiffing a bill? Just asking?
To be clear, i rate Branson for a decision he made, which has resonance, not any other aspect of his business. VJM, yet to show colors.
– j
rpaco,
well you did far better than me on first reading of that!
I can only speak for myself, but the paper gets into discrete states very quickly, computing paths, when really what a seller or buyer wants is a good general idea, not a determinate. There are so many other inputs which can scupper a pricing module at the overall business level. A good place to look is Feynman’s work on the Connection Machine. He turned discrete logic into diffs. (also Nigerian tech!)
Here’s a recollection, sadly not the workings:
http://longnow.org/essays/richard-feynman-connection-machine/
There is almost always better than brute force, if you do not do the typical MIT thing of trying to beat a well tested axiom.
I have no idea how this plays into the fact i will never travel without enough cash or credit to take me on any flight back, never book restricted tickets, worked out long time ago the business premium was small.
Or, in normal language: this is closed state, it doesn’t deal with people interacting with it very well, it only categorizes what they *presumably* want, not what they really want. Which, reading your stories is – ah – a clean price!!
By the way, i think all the register like state diagrams are because they cross compile C and LISP. Just read them like piano notes, and read up on stride lookups. It does have a nice flow.
rpaco, sriously check out Hofstadter, if you haven’t, and if that paper interests you. SO much more! Nearest to usual speak about these problems. And, for computing languages, was fixed in the 50s . . .
There is a computational equivalent to flying, and it’s in your head, and just as dangerous. Or Good.
all best from me,
– john
John (other John)
Thanks for the link, one of my heroes Feynman, (must re-read Genius) other is Eric Laithwaite.who never got the recognition he deserved.
Humble engineer/master of none myself. Once learnt 6502 processor assembler since I had an Oric Atmos, but things moved on, colour telly came. Amstrad PCW8512 (yes we did everything in 256 or 512k not meg of ram) Watched the rise of the IBM PC. DOS (nicked from CPM) and windows GUI (Nicked from Rank Xerox) hence now use only Linux.
Interesting to see FEA (Finite element analysis) mentioned only recently in one of the F1 blogs/reports. I would have thought that it had been superseded years ago (also partial parallel to the cellular automata mentioned in the essay by W. Daniel Hillis for Physics Today re your link.)
Ah yes, we all remember beloved Freddy Laker and the nasty Lord BA who squashed him. But now we have a thin wiley Irishman, a cuddly Greek and a guy who used to sell records, who gets more brand exposure for less money than is reasonable. One of whom may not survive the steadily increasing fuel costs. We had predicted the same thing about car manufacturers way back in the 1990s when production overcapacity was at around 30% only partially due to fuel costs, but then the most likely candidate to disappear in Europe was Ford, not GM funny how things turn out.
Straight out of the fictional Church scene, and Twain’s real life, my old pal Riaz rose up and got in touch! He was and has been very ill, but the blessed Rascal is alive!
This, before anything i said above gets to be another rumour, like the one i was convincingly sold. Apparently it’s been 20 years.
Thank you Joe. I felt it necessary to comment here, if nothing else because the internet poorly records my friend and his deeds. But especially thank you, because your blog has now attained, in my mind, a spiritual power.
– john
rpaco,
thank you for the Lathwaite link. Boy, not long ago weren’t we all convinced maglev was the Future? I understand the Chinese actually have a good working one. Bloody showoffs!
Quickest story about computing, was moaning in the lift about having to install an OS. So my neighbor, who i’d not known before, sniffed and said “got it easy boy, when we got a computer we had to write binary disk routines to load / store” and so the evening went on about how you got a ca. 1950 Borroughs to do anything useful. Another chap from an unnamed office. Never told me what he was doing in Praha at the time 🙂
[skipping Python sketches about Yorkshiremen, because can’t take mickey out of my own history . . ]
About FEA: as i understand it, it’s the essential component to CFD. Basically it’s vector forces. You reduce the energies to euclidian space and do trig on them. (hic means it’s very rough, and so they go for smaller and smaller elements, upping compute needs as they go)
In other words, FEA is water to bread, we’re more interested in eating bread, but without water it sucks a bit. Trig is what the parrallel crowd call “embarassingly parrallel”, so, to a certain extent, throwing processors at it works nicely. (Fortran still rules this) But i think it will hit limits, in current form. Geometry is not simply Euclidian, there is this fun thing with manifolds, and Ito had rather a lot to say in his tragically brief, young life. (like Evariste Galois, who was a true revolutionary) Those are hard concepts to compute empirically.
Well, i’m having a very good day. My old buddy lives, someone who loves F1 susses tech, and there is actually sunshine in London, so I have my view back.
Most of the kit i dealt with to start off was wire loom. But i started rather young. Check out how they had to hire lady weavers to get Apollo up in the air. [see, nothing wrong with coming from a mill!]
You might be interested in a company called Whitechapel Computer Works. I may have mentioned here before, but they were The Top vendor of stack machines. Some of their tech lives on in Linn “hifi”.
Ahh, the Linux thing. Well, i was late to deal with Windows, and it remains the only system to have literally had me in tears with frustration. Then they nicked the DEC code for VMS, and delivered good. I understand VMS, and it’s a world away from Linux. VMS doesn’t flake for silly reasons, simple as that. Also, it’s a blink ago that any serious publishing programme was running on SUN boxen, see 3B2, a Brit effort which still runs most of the biggest serious dailies, and a bigger swathe of government publishing. In the early 90’s a tiny SGI Indy blew away anything the Apple guys could dream of. Photoshop 2.0 rocked on that.
I’m rabbiting, but how it goes is that Windows is the desktop for big commercial apps, and Linux, or something very close, runs the compute back end. VMS? I was stunned to see a minor security alert the other week. First one in, i forget. Personally, i couldn’t care less, so long as it does what it says on the tin. Most of your money moves through a VMS system at some point anyway. SWIFT mate. Hospitals, brokers, power stations. Just trying to turn you on to it, if it escaped your attention. Oh, and the latest “Itanium” will be par with Power 7, Power 7 being the upgrade to what beat those guys at Jeopardy . .
Loved your 6502 ref. That was clean design.
cheers!
– john
rpaco,
had to laugh your mention of this: Amstrad PCW8512
early argument with my much missed business partner . . .
Me, “what you doing with that Not A Computer?”
Nick, “Just wrote a few books, see, over there, printouts!”
So Sugar got one over me. If i started on how many things my partner had over me, i’d have to rewrite the Bible.
. . .
Minor errata.
The latest Itanium is is likely only par with Power 7 in the “right” hands. IBM makes things nice for people. (very important since most of the authors of what makes business tick are dead, so anything new kit has to be perfect for abandoned works) Itanium is a glory hole. Whoever thought it would be a good idea to allow a really down and dirty low level programmer to reimplement a whole paradigm (whichever you like) in the registers, had a sick sense of humor. But it was very handy for porting the lost Alpha processor stuff.
IBM just put the most awesome parrallel tech into their mainstream chip. Extra. Bonus. Mainstream for big companies, that is. It’s just there, waiting to be used.
VMS is your Poor Man’s Mainframe. But because of Microsoft hiring Cutler (along with his printouts!) it’s relatively easy to get someone to an Aha! moment, because they’ve seen it all before, askance.
IBM will sell you very lovely mainframes, headline price isn’t horrible, and eat your dinner on the compulsory support contract. Which is why, in a company setting, VMS just ain’t so bad. Especially if you offer to write something for it, which will save you a decent house a year. Kinda hinting how i survived!
Yes, i read the “UNIX Haters Handbook”, which was all in jest, but still valid. Presume you know how you can lock far more down with NT, object level security is neat, if you have the time. I can’t use either Linux or Apple kit, on my desk, because they are so way behind on color modelling. (CIECAM’02 is the ref) But it’s all good.
– – –
This one is important.
I do not think it is all about Alice nicked something from Bob, or however.
There is an Invisible Hand at work, and a friendly one.
Example: Xerox did a very high level deal before they let Apple not only look at their wonderful Alto machines, but spent days, all hands, explaining the mechanics.
The ’94ish demo video Jobs did of the NeXT Station shames modern tech, so he really got the idea. Pity how they are trying to fuss with publishing now. Rent seeking, not innovation
Basically, the policy, immortal, is “Dual Supply” and if anyone hogs the good bits, someone has a word.
We live very well, as a result.
– – –
hey, anyhow, Knuth just got Volume 4 out! He always said he’d drop dead before he finished. Close run thing, his game. (Joe, this is the computer guy who also fixed typography when it was broke! But think i said that already)
For those who are just fed up with me, on the back of Knuth’s Volume 1, the print i had, there was something along the lines of “If you can read, this, really read this, please please send me your CV” A Certain Gates chap.
Since, about hundred pages in, only to the first volume, Knuth cites Fermat’s theorem as a suggestive excercise, i think Gates was safe!
– – –
Blast it, rpaco, i need to get my company going and my library sorted!
So very much enjoyed this. I hope others will forgive my dalliance with tangents.
Oh. last thing, if anyone else has missed out on Feynman, there is a website out there with all his interviews, one of which made me break down recently beause of the beauty of his insight, and plainness of thought. I forever thank lost bits of my family for making me pay attention, when this was contemporanous. Has not lost the shine. If you want something on the train / metro / El short enough to get done, “Surley You’re Joking, Mr. Feyman” is a riot.
Q.E.D.
(not Latin)
best from me & thanks to all,
– john