Vijay Mallya, ex-billionaire, has squandered his flashy inheritance, a major stake in the famous money-minting Kingfisher liquor business, within ten years. He had the really bad idea of starting an airline. Abruptly leaving Incredible India for cold and humid London, it is claimed that he absconded to avoid paying USD1.3 billion he owes to Indian banks. His passport has been revoked and his staff has not been paid for 15 months. The self-proclaimed ‘King of Good Times’ has hit the bad times. Big time. He modelled himself as the ‘Indian Richard Branson’. How ironic then, that when somebody asked Richard Branson advice about becoming a millionaire, he replied: ‘It’s very easy: start as a billionaire and set up an airline, you will soon become a millionaire’. Vijay Mallya has followed his guru’s advice to the digits.
Starting an airline is a relatively easy task. You don’t even need to own an aircraft. To run it profitably is another story altogether. To be simplistic, just pay out the monthly lease payment of, say, USD100,000 for a narrowbody (single-aisle) regional aircraft. Any billionaire – or country – can fork out much more than this, hence the bait. And aviation is a very emotional subject, due to the allure of flying and the foolishly glamourous status it provides to people with more money than sense. Everybody has an opinion on aviation. Most have never set foot in an airline’s office. The problem starts when you add up the running or variable costs which will inevitably come – and when, conversely, the passengers predicted don’t turn up.
This is why, in its first 50 years to the year 2000, the so-called ‘golden era’ or ‘jet age’ of aviation, airlines returned a financial performance close to… 0%. This does not even compensate for inflation, let alone risk, so your capital is gradually eroded. It is a major challenge to cover the numerous cost items of this complex business on a good day. With daily political interference and adverse conditions like weather, security, ever-intensifying competition from much larger players and volatile fuel prices, it is impossible. If the catchment area for passengers does not contain a middle-income population (ie. with the economic propensity to fly) of around 20 million, don’t even think about it. Unless you can find 5 million very affluent people living in a region… with no air links. Yep, that’s right, this place does not exist.
Media people in the private sector know how challenging it is to run their business. They rightly advise that without readers buying the newspaper and supplementary revenue from advertising, you better not start a newspaper. Yet, against all logic, some still insist that an airline should be started in a sparse region of low population, long distances over water and already pretty well-served by existing carriers. The same was heard for the other grand concept of ‘Compagnie Régionale Maritime’. When the operators who face the challenge of this industry on a daily basis were consulted, the project rightly turned into an… enhancement of current links with existing players. Much ado about nothing. The same goes for the regional airline project. Air Mauritius is already providing a regional service, with other carriers in the region (Air Austral, South African Airways, Air Madagascar). And it recently announced two more regional routes, Dar es Salam and Maputo. Politicians have vague ideas but grand concepts without having to face the realities of balancing the books within a highly technical and complex industry, already consisting of many incumbent players.
At least, the billionaires we love to hate use their own money to finance their follies. Vijay Mallya was more toxic as he locked various banks into his downfall. His ex-Chief Pilot told me that when they landed at Heathrow on the inaugural flight, he had a whisky and a cigar in his hand, celebrating in the cockpit. To some, this is what owning an airline is about. More fool them. Around ten years ago, he was invited at the Toulouse ‘Aerospace MBA’ during his trip there to buy some aircraft (again, some think that managing an airline is just about buying aircraft). He was fashionably late by two hours for a celebrity 15-minute appearance that would have made Salman Khan look like an introvert. As a Visiting Lecturer who happened to be there on that day, I wanted to tell him that he should concentrate on managing his business with less glamour and, maybe, even become a low-cost airline. I just knew he was flying straight into the mountain. The terrible irony is that he thereafter acquired a competing low cost airline, Air Deccan but… only to kill it in 2011, saying that he ‘did not believe in low cost airlines anymore’. When ignorance is bliss, ’tis folly to be wise. An Indian aviation expert, a proper one, later opined that Mallya should have rather closed down Kingfisher and developed Air Deccan. Another senior Indian professional told me that Mallya, instead of talking to the likes of him or I, would have been much more interested to talk to the photographer kid shooting his modelling stewardesses on yachts for the Kingfisher bikini calendar. The rest is history. Yet another airline crashing. Worse, no more calendars. For a fashionable billionaire, his pompous views of airline-ownership (Management? What management?) were obsolete by 30 years.
Not even billionaires can afford to lose the kind of money required to run an airline. When it comes to public money in a small country running a large deficit, one wonders who would ultimately pay for this folly, if it does indeed go ahead. Well, as always, it will be the taxpayers. Unless a promoter is putting his money on the table, beware, ‘any fool can start an airline’. This is a well-known, oft-proven saying amongst those working in the aviation industry.