Vijay Mallya, the boss of Force India, has been in the news a lot in recent days thanks to his troubled Kingfisher Airlines company, which has debts of $1.5 billion. Mallya has just announced that the airline will exit the low-cost sector and try to make money as a premium airline.
Kingfisher, which was launched in 2005, entered the low-cost segment when it bought out Air Deccan, India’s first budget airline, in 2008. The airline has never made a profit. Earlier this year the company cut its debts by issuing shares to 14 banks. The company is now looking to sell and lease back planes in order to raise working capital.
Kingfisher operates 370 flights a day, aims to increase its overall capacity by 10 percent by reconfiguring its aircraft, which will significantly improve revenues. There are also plans to cut unprofitable routes. Shares of Kingfisher Airlines have lost 62 percent of their value in 2011.
joeblogsf1 
But the whole problem is selling any airline as “premium”. My check in at LHR used to be 10 minutes, max, including the walking, tumbled into a nice lounge with free grog (now we know true the rot of business productivity! okay, sandwiches etc very nice. oh and the kicker is you could always take a later flight . . yup, rot!*). But no, you cannot pay for that kind of service any more. Security theater. (look that up, especially see Bruce Schneier for the sane view)
I don’t think the airlines biz can do premium any more. That was a 50s thing, which was marketed beyond it’s sell by date. I have a pal who was the (no kidding) first bucket shop operator in the UK. Sussed the system and got blackballed. You just cannot sell 5 grand tickets and put the payor through the unpleasantness which is current idea of “security”. At that level you might as well get a private jet. There are sharing schemes which make that cheaper even.
(and i managed not to slag off VJM. He’s tilting at rainbows anyhow, with this.)
– j
*just to say, this was not on an expenses account. The composure this afforded me was worth it in results. All Gone.
The headline made me laugh 🙂
Clearly you have some issues with the guy, and from what I know of him he doesn’t seem like the world’s greatest human being, but couldn’t that headline also have been written as
“Mallya moving up market”
That would not be a fair headline. $1.5 billion in debt…
That you for taking the time to seek out genuinely interesting stories. This is as apposed to certain other blogs that are simply regurgitating the fairly obvious empty stories.
Well said Joe with $1.5 billion in debt and a restructuring to a high end airline to try and make a profit “moving up market” would not be a fair headline.
I think yours got the middle ground between positive and negative. If you had said something “Mallya in $1.5 billion failure” then I might have been more in agreement with Gareth’s post as it stands don’t think it is one way or the other in terms of personal opinion unlike “moving up market” which is clearly a pro Kingfisher airlines/Mallya statement.
There are few airlines (non government owned/subsidized) doing well any where in the world. I think Southwest in the U.S. is doing good. I most in Europe are suffering. Can’t speak for Asia. It’s a brutal business. Don’t know about upmarket – does that mean they will offer different classes (i.e. kingfisher was an all budget airline like Easyjet or Spirit Air?) since business/first class offer higher margins? Would make some sense since your post mentions “reconfiguring” aircraft.
I am somewhat perplexed at the sight in the pit wall of business men with vast and complex businesses who seemingly are able to spend time in their F1 forays. Do these guys only appear at race weekends? Do they dedicate themselves to this facet for the love of motorsport ? for the love of the camera ?
I thought being the boss of an F1 team to be a 110% full time occupation. So how do they manage? And does one need not any motorsport credentials, achievements or at least experience to be at the helm of a credible F1 team ?
Interestingly R B only makes appearances at major venues. He is waiting to see if marussia/virgin becomes a player before wrestling control and make himself a feature in the pit wall…
Would like to know what your views are on this subject.
Thanks, as ever, for blogging.
Re Jose Perth
Good points! Wondered for some time where some of these boffo billionaires get off as ‘team boss’. Apparently no prior experience required.
Love to hear (read) Joe’s response.
Joe
Has VJ paid Tonio yet?
Denis,
I believe there is a drip feed going on each month
Jose,
Amen, brother.
-j
At least FI is punching above its weight. Playing to its strengths and threating some of the bigger teams.
Joe – it would be interesting if you did a post on what was behind their success. Technology sharing, key staff appointments, etc.
@Jose – Perth – Ever seen Didi Mateschitz at every race meetings?
Shallow water makes the loudest noise they say, which seems to be the case of Indian Playboy Mallya, whose life long dream seems to have been hobnobbing with rich and the famous that are part of exclusive club called F1.
In case of Mallya, his core business (liquor) has been been acquired as inheritance and every venture outside that core business seems to have gone south.
While spending time trackside and watching his “liquor” brand billboards circulating the tracks making money for him is not a bad thing, while the yuppie crowd in burgeoning middle class India is busy filling coffers for him with every pint of his brand they down 🙂
http://on.msnbc.com/dUnYf4
If he can’t make the business work as a value airline, I doubt he can as an upmarket airline.
I have to say, my experience of Kingfisher last year was pretty poor, but on balance no worse than easyjet, and infinitely better than than Scumbag-O’LearyJet (I mean Ryanair).
Being from India I would say that the concept of Premium Airlines would never ever work here. I would say that yes LHC has a long security process but in India it is even worse. On an average it takes 1 hour and you have very unruly security officers. So there is no way that people would pay a premium unless the security clearance time is made short which of-course VJM cannot decide on.
A funny thing is that in short sectors people actually prefer high speed trains! Example is Chennai-Bangalore sector. The high speed train tickets cost around $15 and it takes 5.5 hours. The plus is both the stations are right in the middle of the city. Same by flight despite the journey being only 1 odd hour but you take in the security time at the airports and the distance between airports and the city takes around the same time!
VJM is into too many things and he just cannot be the principle of the FI team! Apart from the airline business he dominates the liquor market here and also owns cricket and football teams. He must take cue from DM and let someone professional to run the team like RBR does. Hope this loss would not affect the F1 team. The team has good drivers and with more funding can even challenge LRGP.
What’s new Joe?! Deccan Airlines bites the dust joining the list of companies felled by liquor baron Force India UB Vijay Mallya….post Best & Crompton that in its heyday stood as a rival to Larsen & Toubro
Agree with other John, premium travel – what was left – died with the Concorde. Truly wealthy people talk about the differences between G4s and G5s. Pehaps this is a western view, once again. Still, I’m not complaining too much, for every empty seat at the front, there is more chance for an upgrade and the opportunity to be merry even before take off. As for selling and renting back (airplanes), isn’t that what people do when their homes are about to be repossessed?
To be fair to Mallya, whatever his personal qualities or failings and business acumen in the airline and other sectors, he has been one of the few billionaire type guys to keep putting money into the team and Force India is in a better competitive state than it was at the end of its previous incarnations as Jordan/Midland/Spyker. Credit to him for that, and for sticking at it when the only real tangible success worth boasting about was Fisi’s podium at Spa a couple of years ago.
Shares have lost 62% in a year. Ouch.
Mallya has turned Force India into a credible F1 outfit and has consistently moved them up the grid to the point they are up there with Mercedes and Renault as F1’s 4th best team so he deserves credit for that, yes he has an ego the size of Texas, yes he has fingers in too many pies, yes he loves mixing with the rich and famous but after the laughing stocks of Spyker and Midland I can’t fault what Mallya has done, he is also a massive car enthusiast too with his Mallya Collection.
In addition, Vijay Mallya is also a Member of Parliament.
Like Joe said, fault him for anything; but you cannot say he does not care for the team. He has put in a lot of money & effort to ensure that Force India have a good base of technical staff. Maybe he should invest more in terms of good drivers like Paul di Resta.
i’d say that FI are less credible than the glory days of Jordan, who managed to win a few races. for all his billions, mallya seems to be having a little money trouble. has he even paid for his hospitality units yet?
Richard Branson is a media whore. He only attends if it’s in his interests not the teams or anyone else’s.
“Jose – Perth – Ever seen Didi Mateschitz at every race meetings? ”
Red Bull sponsor everything and anything. So it’s unlikely he can attend each type of event. We have no proof of him ever even liking F1 as this quote of his alludes to the real reason he goes racing:
‘Didi’ Mateschitz insisted: ”F1 is good for the brand and good as a marketing instrument. It is a marketing tool.”
So the two ‘hero’s of motor sport backing have little or no interest in the sport.
Those who allude he has an ego the size of an American state – can you verify that from a personal perspective?
Seeing him on the TV grid walk last Sunday I saw a self conscious man who was not comfortable in front of the camera. If he was such a raging ego he would be in front of the camera at any opportunity. He isn’t –or at least he isn’t on the UK TV.
Kingfisher beer was sponsoring Benetton back in ’96 and allegedly was close to McLaren way before then so he is a racing fan (a bigger cricket fan of course but he is Indian).
Of course day to day running is left to those who know (such as his car collection) and he isn’t a regular visitor to either the factory or the wind tunnel but that’s how business tycoons work. I’m not always a great defender of him and his business practices (esp his (non) payment terms) but I cannot agree with some of the unqualified slating here..
Did I read that right? They’re going to increase capacity by 10% by reconfiguring their aircraft.
Doesn’t that mean they’re going to squeeze in 10% more passengers?
And – correct me if I’m wrong – they’re moving from a budget airline up to the premium market, while squeezing 10% more passengers onboard?
Now, I’m no Business & Marketing Consultant, but…
Rumour about some ‘due diligence’ going on in the accounts department with the possibility of a partner or a big name sponsor? Just in time to help out the 10m+ wind tunnel investment planned..
Anyone got a lead into whom it may be?
I know know what is about to happen and who the main players are. Expect a big announcement in the next few weeks
i hope the losses don’t make him cut his spending in his leisure ventures : aka Force India and a cricket and two football teams back home