Section 37
Why Kingfisher Airlines was grounded
What happens when a business never earns a full-year profit but keeps borrowing?
- case
- Failure
- years
- 2005-2019
- ₹16,023.46 crore
- Accumulated losses · 31 March 2013
- Negative ₹12,919.81 crore
- Net worth · 31 March 2013
- Over ₹7,000 crore
- Bank consortium exposure (SBI-led, 17 banks) · 2012
- 01
The situation
Kingfisher Airlines began flying in 2005 as a premium full-service airline. According to its results reported by Business Today in May 2013, it never posted a full-year profit after starting operations.
- 02
The decision
The airline funded its losses with bank loans. A consortium of 17 banks led by State Bank of India had an exposure of over Rs 7,000 crore by 2012, Business Standard reported. By October 2012 the airline had suspended its operations.
- 03
The outcome
On 20 October 2012 the Directorate General of Civil Aviation (DGCA) suspended Kingfisher's flying licence after the airline failed to answer a show-cause notice and produce a revival plan. As of 31 March 2013 its accumulated losses stood at Rs 16,023.46 crore and its net worth was negative Rs 12,919.81 crore. On 5 January 2019 a special court in Mumbai declared promoter Vijay Mallya a fugitive economic offender under the Fugitive Economic Offenders Act, 2018, on an Enforcement Directorate application; he was the first person declared so under the law.