New Delhi: Vijay Mallya has been in the line of fire of most Indians this past week, with popular opinion firmly against the flamboyant billionaire for mishandling his airline business and letting the situation get so out of control that employees are out on the street, the airline faces licence cancellation and creditors are knocking his doors.
But shouldn’t some of the blame for this mess in Kingfisher be laid at the door of CEO Sanjay Aggarwal?
Aggarwal was brought in two years ago from SpiceJet which he managed to turn around and declare profit for the first time in five years in 2009-10. Many in the airline industry see him as a man dear to investor Wilbur Ross and also as a turnaround specialist of sorts. So why didn’t his magic work for Kingfisher?
Till recently, Kingfisher was considered the best in class for service, meals on board and staff courtesy, and the airline still carries a logo on its letter head (used to communicate with stock exchanges) which says it is a five-star rated airline as per rating agency Sky Trax.
Mallya roped in Aggarwal in October 2010 after several warnings about his penchant for taking every single decision by himself and how this could ruin the loss making company’s image as well as balance sheet. By that time, the acquisition of Air Deccan had already begun to spell ruin for the airline. At the time of Deccan acquisition, the airline had a fleet strength of 88 aircraft – which many said was severe over capacity.
Mallya handpicked Aggarwal with the singular mandate of turning around Kingfisher, just as he had made a success of SpiceJet. But the job was nothing if not tough. At the time of Deccan acquisition, the airline was saddled with 88 aircraft in a declining market, just when a global slowdown was beginning to kill the aviation business. Though Aggarwal arrived on the scene many months after the acquisition, employees we spoke to aver he did little to forge synergies between a low cost airline like Deccan and a full service carrier that was Kingfisher then.
“The airline business works on wafer thin margins. Margins are barely 2-3% so there can be no room for extravagance. Aggarwal failed to introduce any financial discipline or establish network synergies. Pilots and engineering bases were not rationalised, contracts which were earlier based on a much lower fleet strength were not rationalised once the Deccan acquisition was complete. Fuel supply contracts, engineering contracts which could have been renegotiated on better terms were not touched. In the last year to year-and-a-half, Mallya handed over reins on the business entirely to Aggarwal so he should be held at least partly responsible for the mess there,” a former employee with Kingfisher said.
A senior captain with the airline said that though there is no personal grudge against Aggarwal, he needs to take the major share of the blame for bringing the airline to its knees.
“When I joined in 2009, Kingfisher had 850 pilots on its rolls. Today, this number is just about 220. Aggarwal has ensured he saves a lot for the airline by not paying salary dues to all those pilots who quit in the last one year. If this is not inefficient management, what is?”
Senior employees have, in the past, alleged that Aggarwal runs the organisation in an autocratic fashion, leaving little room for collective decision making, but these allegations could not be confirmed.
Also, in Aggarwal’s defence, it must be said that he may not have had a completely free run in managing the company’s affairs and some decisions may have flown from Mallya directly, though employees say once Aggarwal arrived on the scene, Mallya allowed him the freedom to take decisions.
One of the most crucial decisions affecting the airline’s fortunes – policy change which would allow foreign airlines to invest in Indian carriers – was taken only middle of last month, and this is what Mallya had been aggressively lobbying for. Other factors too may have been outside Aggarwal’s control. For one, the operating environment has been quite challenging for the aviation business globally, as also in India.
In the last few months, Kingfisher, led by Aggarwal, has actually taken some unpleasant decisions like completely stopping overseas operations, rationalising bases across the country and finally also offering the cheapest fares on most routes to fill planes. But all these decisions pale in significance when one considers the plight of employees who have not been paid for seven months, flight schedules which have been regularly violated and the red ink on the airline’s books deepened.
Despite calls and text messages to his mobile phone, Aggarwal did not speak to us for this story for the last three days.
It is interesting to note that while most Kingfisher employees have not been paid since March this year, Sanjay Aggarwal’s salary for year ending March 2012 has nearly doubled to Rs 4 crore. But he claims like Kingfisher’s other employees, his salary has also not been paid for several months. Speaking to the media after the airline ceased operations, he said “mine is the last cheque (salary) to be credited and even I have not been paid”.
An employee says perhaps Mallya should have hired a more seasoned CEO to turn around a bleeding airline operation, but perhaps Aggarwal would disagree.