BUSINESS ETHICS AND

GOVERNANCE
              KINGFISHER AIRLINES
Kingfisher Airlines Limited was an airline group based in India. It was
established in 2003 and started its commercial operations in 2005.
Through its parent company United Breweries Group, it had a 50% stake
in low-cost carrier Kingfisher Red.
Until December 2011, Kingfisher Airlines had the second largest share in
India's domestic air travel market. However, the airline ran into
continuous losses since its inception, ran high debts and finally closed its
operations on 20 October 2012.[6] Its chairman Vijay Mallya subsequently
fled to London to allegedly hide from creditors
 Kingfisher Airlines was established in 2003. It was owned by the Bengaluru based 
United Breweries Group. The airline started commercial operations on 9 May 2005, right
after Mallya's son Sidhartha's 18th birthday, reportedly as a birthday gift, with a fleet of
four new Airbus A320-200s operating a flight from Mumbai to Delhi.[8][9][10] It started its
international operations on 3 September 2008 by connecting Bengaluru with London.
Kingfisher's head office was located in the Kingfisher House in Vile Parle (East), Mumbai,
[11]
 but later moved to The Qube in Andheri (East), Mumbai. Its registered office was
located in UB City, Bengaluru.[12][13] In November 2005, during the World economic forum,
the airlines CEO Vijay Mallya announced the airlines intention to launch an IPO to raise
200 million dollars for the airlines expansion and possible takeovers (including that of Air
Sahara which was being eyed at that time).[14] It later transpired that the airlines was
already heavily in debt and going each year in heavy losses.[
 A. FAILURE OF CORPORATE
GOVERNANCE OF KINGFISHER AIRLINES
INITIAL TROUBLES 
 KFA’s troubles started right from the start of its operations in 2005. It is also a
well-known fact that the fixed costs for Airlines are very high. Fuel expenditure
accounted for 50% of aviation firm’s operating costs. In 2005, the oil prices
were soaring at nearly $75 per barrel. 
For 2005, KFA had a revenue of ₹ 305.55 crore ($ 61 million),and the net
loss was ₹ 19.53 crores ($ 4 million). In 2006 the revenue increased three
fold to ₹ 989.12 crores ($197.8 million), and net loss has grown to an alarming
₹ 272.44 crores ($54.4 million). 
In order to increase crew size and start foreign service, KFA went for a reverse
merging with Air Deccan
MERGING OF AIR DECCAN
Acquisition of Air Deccan  Towards the end of 2007,  KFA in order to meet this requirement decided to acquire
46% of ‘Air Deccan’ another low cost Airliner, to compete with other  low cost carriers and most importantly
to be able to open international operations. 
 Air Deccan was in existence for more than five years and this acquisition would allow KFA to fly on
international routes. To facilitate this, a reverse merger was engineered, first Air Deccan acquiring KFA and few
months later the merged Airline becoming KFA again.  
KFA also hoped that the acquisition would save ₹ 300 crore ($60 million) annually and also increase the fleet
strength to 71. This acquisition was financed with ₹ 550 crore ($110 million) from the group’s holding
company UB Ltd. 
By March 2008, the debt stood at ₹ 934 crore ($186.8 million) 
 In 2009 KFA board of directors approved a resolution to raise ₹ 500 crore (US $ 100 Million) by using Global
Deposit Receipts (GDRs) and also other means. Further they approved raising another ₹ 500 Crore ($100
Million) by issuing rights shares to existing shareholders 
 By the end of 2009 the net-worth of the company has become negative.
BANKS CAME TO THE RESCUE 
In 2009, IDBI approved a loan of ₹ 950 crore ($190 million) in spite
of turning down the same request in 2006. 
 Mallya approached a number of other banks between 2008 and 2010 and
managed to get huge amount of loans from a number of banks. 
 Surprisingly these banks provided the loans to KFA by taking
the company’s ‘brand value’ into consideration and seven trademarks
as collateral. They included Fly Kingfisher (Label Mark and Word),
Flying Models of Kingfisher, Fly the Good Times, Funliner and Kingfisher,
which were valued by global consultancy firm Grant & Thornton. 
Director elucidated several factors responsible
to the downfall of “Kingfisher Airlines”
including Mallya considered Kingfisher as his
fiefdom; he withdrew substantial amount of
money and diverted to several shell companies
outside india and IPL; the CEO of the
Kingfisher was paid exorbitant salary, ie second
highest ...
salary; Questionable role of Independent Directors/
Auditors/regulators/bankers; Lack of transparency prevailing at
Kingfisher; Lack of professional management; ill timed merger
with Air Deccan; Political funding; Lack of delegation of
responsibilities; Defaulted on salary payments; pledging of
shares by Vijay Mallya for getting loans from other banks. In all,
based on facts and figures, the seminal lecture critically
analyzed the “Rise & fall of Satyam & Kingfisher Airlines” and
put forth a right perspective. Chairperson for “Special
Seminar”- Dr. S. K. Dube expressed vote of thanks to the
Director, Prof. J.P.Sharma for his ‘insightful lecture’ and keeping
the flame of “Knowledge sharing” alive in IMS.
B.          AFTERMATH OF SCAM 

Following the Kingfisher scam, the Central Vigilance

Commission (CVC) directed the PSU banks to make
the loan verification more robust and stricter by hiring
consultancies or by setting up a new division for the
second time verification of the documents based on
which the loans are granted by the banks. Moreover,
SBI affirmed to protect the bank’s interest and public
money after the lessons learned from the kingfisher
scam.
Ultimately, the general public is the one who suffers from the loss
caused by the kingfisher scam since it was their hard-earned money
collected by the government as tax for the welfare of everyone.
Hence, instead of tying-up with the business tycoons in financial
frauds, government officials must prevent it by saying ‘no’ to
corruption.
C .AS A MANAGER WHAT WOULD BE YOUR APPROACH TO
UNDO THE SCAM
KF is pretty far down the hole to be able to sustain a revival
even if one were to attempt one now. If fuel prices remain
low, there is an outside chance. But, this is fundamentally
what needs to be done, looking at it from my perspective:
I think the cost of keeping the company afloat while their
planes are not flying are adding to their woes, but if they
were to start on a fresh slate today, I'd suggest:
1. Cut out this lavish airline bullshit. Who cares about five star service in a
nation where the longest flight domestically is less than three hours?
2. Increase the number of seats, and cut ticket costs. I never understood
KF's logic of running a plane half full, when the Indigo flight that left
fifteen minutes before is completely full.
3. Keep business class really small. It's okay to tell customers business
class is full. If the premium customers want to try another airline, let
them go
 In a cost conscious economy like India, only companies like Indigo will thrive. And they're an
EXCELLENT airline. No frills, but great efficiency. Who gives a rat's bottom about "the king of
good times" and nonsense like that when all you want is efficient transportation? The vast
majority of India's domestic air travelers are not taking a vacation in the air
 Their ticket prices were comparable to other budget carriers - yet it was all luxurious. I
remember those headsets they gave, food on board. It was more for those who want to enjoy
their flight. However there was a small problem - for 2 hrs journey does someone really care
about the luxury or for that extra thousand buck
THANK YOU