26 replies to this topic

[Mr Plug]

Business Standard - an Indian-based newspaper - reports that Vijay Mallya has some hard work ahead of him this week. (see http://business-stan...k-ahead/487306/)

He has assets that he can sell, and will probably need to if he wants to keep Kingfisher Airlines in the skies - it is basically reliant upon injections of his cash and personal guarantees. The big question is, if he then loses control of his United Breweries empire (see http://www.telegraph...ed-Spirits.html) how long will he be digging into his pockets to also support Force India, given that the majority of major sponsors are companies that Mallya currently controls.....but may soon lose.

Edited by D.M.N., 23 September 2012 - 10:22.
fix broken url

[sultanofhyd]

Business Standard - an Indian-based newspaper - reports that Vijay Mallya has some hard work ahead of him this week. (see http://business-stan...k-ahead/487306/)

He has assets that he can sell, and will probably need to if he wants to keep Kingfisher Airlines in the skies - it is basically reliant upon injections of his cash and personal guarantees. The big question is, if he then loses control of his United Breweries empire (see http://www.telegraph...ed-Spirits.html) how long will he be digging into his pockets to also support Force India, given that the majority of major sponsors are companies that Mallya currently controls.....but may soon lose.

That is exactly why he sold a significant amount of the team to Sahara, he doesn't want the airline crisis to affect his team. Sahara group has indicated that it is willing to completely take over the team if needed. Mallya has ensured the team stays in Indian hands.

[SpaceHorseParty]

BBC reports Kingfisher has lost its licence to fly and has £870m in debts.

[Ferrari_F1_fan_2001]

What caused the problems?

Was it a case of taking too much money out to fund a lifestyle or too many directors (ie family members) having too big salary dividends?

[aditya-now]

BBC reports Kingfisher has lost its licence to fly and has £870m in debts.

Tough, let us see what happens to Force India then.... they still have not announced their drivers.

[F1ultimate]

What caused the problems?

Was it a case of taking too much money out to fund a lifestyle or too many directors (ie family members) having too big salary dividends?

The airline industry is no laughing matter. Etihad and Emirate airlines have been very aggressive in their global expansion to the misery of Quantas and others. Combine this with a nervous economic climate and you have a volatile commercial climate that puts the nail int he coffin for long term strugglers like Kingfisher.

[Scorg]

The airline industry is no laughing matter. Etihad and Emirate airlines have been very aggressive in their global expansion to the misery of Quantas and others. Combine this with a nervous economic climate and you have a volatile commercial climate that puts the nail int he coffin for long term strugglers like Kingfisher.

Very true and you only need look at what is happening with the US and EU carriers all merging with former competitors to keep competitive.
The market is really stacked against Kingfisher and no matter how prudent they maybe, it will still be a difficault task to turn it all around.

Airliners are a bit like the car manufacturing industry right now, over capacity in set markets.

[skinnylizard]

The Mallya business is divided into four things -

United Breweries - Kingfisher Beer, crown jewel, controlled by him.
United Spirits - Whyte & McKay etc, leveraged shares in this against the Airline.
Kingfisher Airlines - defunct.
Other - Mangalore Fertilizers & other unlisted businesses.

Vijay Mallya is no longer a Billionaire, his airline is now shut and he is most likely to lose majority control in United Spirits his liquor arm but still have a share though much smaller.

However he will retain control of United Breweries as well as Mangalore Fertilizers (turn over of $670million, which he might sell) there is also massive land holdings, a mall, commercial property in Bangalore an IT firm and other unlisted interests..

so he will end up worth only about US$600-700 million. He still owns the IPL team which should be worth at least $50million and half his F1 team.

My thought, is he will be fine and so will Force India.

Edited by skinnylizard, 02 January 2013 - 11:54.

[skinnylizard]

Very true and you only need look at what is happening with the US and EU carriers all merging with former competitors to keep competitive.
The market is really stacked against Kingfisher and no matter how prudent they maybe, it will still be a difficault task to turn it all around.

Airliners are a bit like the car manufacturing industry right now, over capacity in set markets.

while Etihad & Emirates are world class operations and truly aggressive, they also happen to be state backed/state owned airlines.. i recall reading about Emirates that their operation at DXB runs almost round the clock and they get to maximise their revenue potential because of it. So they are better placed than most to weather the storm.

Kingfisher made too many cardinal mistakes.. bought into a low cost arm, competed against itself, ego, the economy is what brought them down..

[Talisman]

The airline industry is no laughing matter. Etihad and Emirate airlines have been very aggressive in their global expansion to the misery of Quantas and others. Combine this with a nervous economic climate and you have a volatile commercial climate that puts the nail int he coffin for long term strugglers like Kingfisher.

Kingfisher wasn't competing with etihad or emirates though, its main market was india's domestic market. Mallya found a good niche with a glitzy premium look but he was also over optimistic. He put massive debt on the airline buying up a massive fleet then couldn't cope when the indian airline market collapsed. He's been given multiple lifelines at several points which he rejected and has mismanaged the decline of his airline. There's a good reason why kingfisher is doing a lot worse than its competitors like Jet.

[seahawk]

Well the massive fleet was not a bad idea, until India failed to make the airports ready for the possible increase in air travel. Add the desire to safe Indian Airlines / Air India and India has become a very difficult market fpr airlines.

[skinnylizard]

Kingfisher wasn't competing with etihad or emirates though, its main market was india's domestic market. Mallya found a good niche with a glitzy premium look but he was also over optimistic. He put massive debt on the airline buying up a massive fleet then couldn't cope when the indian airline market collapsed. He's been given multiple lifelines at several points which he rejected and has mismanaged the decline of his airline. There's a good reason why kingfisher is doing a lot worse than its competitors like Jet.

not strictly true... the Indian govt did not allow local airlines to fly overseas unless they had been in business for five years or so..Kingfisher was desperate to fly overseas and the only way they saw to do this was to buy a local airline which was Air Deccan a low cost carrier to be able to fly international.

this meant competing against their own brand and diluting it as well. to say nothing of the $400 million or so they spent on the acquisition. Flying international proved to be not as profitable as envisaged, the world economy hit the skids and oil prices shot through the roof as well vis a vis when KF was envisioned and when Deccan was bought.

my point here being, Mallya did screw up in some ways and a the environment hastened the fall but the man is not just a rich playboy as his image might suggest. He did inherit the brewery but it was much, much, much smaller. he also did some interesting things in his time.. business wise but i guess this is not the space for that.

Force India is more than a branding thing for him i think, he has been involved in F1 since 1996 i believe... i dont think he will give it up so easy.

[skinnylizard]

Well the massive fleet was not a bad idea, until India failed to make the airports ready for the possible increase in air travel. Add the desire to safe Indian Airlines / Air India and India has become a very difficult market fpr airlines.

i dont think number of airports was ever an issue. Rail connectivity across India is not only excellent its more or less comfortable too depending on budget. So air traffic always had competition to begin with. Despite costs,air traffic has risen every year, the problem has been policies and fuel prices and of course keeping the state owned airline running.

Edited by skinnylizard, 02 January 2013 - 12:40.

[Talisman]

not strictly true... the Indian govt did not allow local airlines to fly overseas unless they had been in business for five years or so..Kingfisher was desperate to fly overseas and the only way they saw to do this was to buy a local airline which was Air Deccan a low cost carrier to be able to fly international.

this meant competing against their own brand and diluting it as well. to say nothing of the $400 million or so they spent on the acquisition. Flying international proved to be not as profitable as envisaged, the world economy hit the skids and oil prices shot through the roof as well vis a vis when KF was envisioned and when Deccan was bought.

my point here being, Mallya did screw up in some ways and a the environment hastened the fall but the man is not just a rich playboy as his image might suggest. He did inherit the brewery but it was much, much, much smaller. he also did some interesting things in his time.. business wise but i guess this is not the space for that.

Force India is more than a branding thing for him i think, he has been involved in F1 since 1996 i believe... i dont think he will give it up so easy.

So in other words Mallya overexpanded and got caught short. At no point did his airline return a profit yet he still bought and leased a massive fleet as well as acquiring another airline. He refused to sell a majority stake in his spirits company until it was too late so he got less than he could have and also had to have a clause allowing diageo to buy the remaining stake if need be. He could have cut routes but didn't so his airline ended up cancelling sporadic flights which is the best way possible to eliminate customer confidence.

His brewery business did do very well but then as one of India's largest alcohol companies in a market that is highly protectionist and rapidly expanding that isn't surprising.

BTW I disagree that airlines in india face stiff competition from railways. Due to the sheer distances involved in crossing the country and the lack of a high speed rail network airline travel is the only serious option for commercial travellers. Internal tourism might be another matter though.

On the other hand I think he's done a good job with FI where though I don't like some of his methods I can't deny he has turned the team around. However I don't have the same faith in Sahara, if they take over the team it'll go backwards rapidly.

Edited by Talisman, 02 January 2013 - 14:05.

[BoschKurve]

Tough, let us see what happens to Force India then.... they still have not announced their drivers.

I suspect this all may be what puts Bruno Senna in the 2nd seat. Regardless of what was said about "no pay drivers", it'd likely take some of the burden off the team to have additional sponsors brought in.

[skinnylizard]

So in other words Mallya overexpanded and got caught short. At no point did his airline return a profit yet he still bought and leased a massive fleet as well as acquiring another airline. He refused to sell a majority stake in his spirits company until it was too late so he got less than he could have and also had to have a clause allowing diageo to buy the remaining stake if need be. He could have cut routes but didn't so his airline ended up cancelling sporadic flights which is the best way possible to eliminate customer confidence.

His brewery business did do very well but then as one of India's largest alcohol companies in a market that is highly protectionist and rapidly expanding that isn't surprising.

BTW I disagree that airlines in india face stiff competition from railways. Due to the sheer distances involved in crossing the country and the lack of a high speed rail network airline travel is the only serious option for commercial travellers. Internal tourism might be another matter though.

On the other hand I think he's done a good job with FI where though I don't like some of his methods I can't deny he has turned the team around. However I don't have the same faith in Sahara, if they take over the team it'll go backwards rapidly.

Mallya bought Deccan when he realised the airline would not be able to fly abroad or rather he would not be able to get the government to go his way. it happened early on in their operation and its important to remember the business was not bad then, another buyout had happened between two other airlines, the $ was not as strong as it is now and oil was much more stable. Not that it means he didnt screw up which he did.

he carried on because the money was debt, he didnt care essentially, he tried to keep going till a solution turned up but it just ballooned the debt.

as for trains, a great many travellers choose train because of affordability and connectivity. also, they employ 1.4million people and had a revenue of $19Billion. So its a huge business and tourism is a very small part of the enterprise..

another thing to factor in is the heavy taxes added on ticket prices and also the cost of turbine fuel which is taxed upto 40%.. the govt definitely does not make it easy to run an airline in India.. hell they dont make anything easy.

i hope this is not going too off topic. either way for Mallya, he has an exit out of his mess but it will involve a bruised ego and writing off some of that wealth but not too big a chunk. it will make him a pariah for bankers though.. even though the bankers should have known better.

Sahara are essentially a money operation, they will not i think meddle in the business, they own it with Vijay M and i dont see why they would tinker with whats not broken.. in the short term i dont see any problems with the business, with investments etc.. how the engineering will work, lord only knows.

[Mr Plug]

Oooops!

[Group B]

Can the team really continue to be totally immune to VJ's fiscal implosion?

[skinnylizard]

it is mostly likely an aircraft owned by Kingfisher and used by him as his personal aircraft. each business Spirits, Brewery, Fertilizers, IT, Real Estate are independent and most cases publicly listed. one melt down does not affect the other in any way other than prestige.

[Mr Plug]

it is mostly likely an aircraft owned by Kingfisher and used by him as his personal aircraft. each business Spirits, Brewery, Fertilizers, IT, Real Estate are independent and most cases publicly listed. one melt down does not affect the other in any way other than prestige.

Mr Mallya had actually shifted ownership into his UB Group see HERE, and not even that group seems to actually own it! However, it was operated by Kingfisher and the tax authorities' action means he can no longer use it to fly to Grand Prix's.........perhaps the next Force India driver selection will be made on the basis of who owns a private airplane; Rubens Barricello? Michael Schumacher? Eddie Irvine????????????

[Talisman]

one melt down does not affect the other in any way other than prestige.

Really?

Exactly what did Mallya use as collateral for his kingfisher airline debt if not his other companies?

One interesting point is that most of the force India sponsorship comes from united spirits. Once diageo takes its majority stake later this year they could theoretically opt to cancel the sponsorship deal. If so how will Mallya fund the team?

[goldenboy]

Pay your damn employees. What an asshole.

How much are they oweing in unpaid wages?

[goldenboy]

Really?

Exactly what did Mallya use as collateral for his kingfisher airline debt if not his other companies?

One interesting point is that most of the force India sponsorship comes from united spirits. Once diageo takes its majority stake later this year they could theoretically opt to cancel the sponsorship deal. If so how will Mallya fund the team?

Especially considering they are heavily involved in Mclaren. However, I used to work for Diageo and they are a good company. I doubt they would want to be responsible for the collapse of an F1 team and it's personnel.

[BRG]

Things are getting sticky for Mallya.  Although he is contesting the 'wilful defaulter' tag, if it is upheld, he will be unable to borrow even one anna.  Can Force India survive if Mallya has to cut and run like Fernandes did?  With Caterham faltering seriously, and Sauber & Lotus supposedly on their uppers, the grid is looking like it might shrink alarmingly.  Forza Rossa is a pipedream so only Haas might be a possible new entrant but it would all be a major headache for Bernie.  Perhaps prison might have been a better option!

[pdac]

Three cars per team could be coming

[aray]

As much as I like to see a Indian running F1 team (being a Indian),I won't mind to see this guy fall...the corrupt he is,he deserve the punishment.

[aguri]

This is why we need equal revenue split and more advantageous customer team regulations. Because the alternative is 4 teams (FI, Caterham, Sauber and Lotus) potentially going bust over 1 or 2 seasons.