Will Vijay Mallay's airline problems impact his F1 team?
The aviation business is not good – at least not for Vijay Mallay's 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. More at Joe Saward