This is a real story of disappearing airlines in India. In 2011, this airlines had the second largest share of India’s domestic market. However, in 2012, the airlines closed. What went so wrong ?

Established in 2003, airlines was backed and owned by a large group based in Bengaluru. Despite being formed in 2003, it wasn’t until 2005 that the airlines took its first flight. By 2007, the airlines had grown its fleet to 20 Airbus A320s, operating a network that spanned 26 destinations. In September 2009, the airlines began its first long haul flights to London. At its peak, the airlines had a fleet of 69 aircraft, the bulk of which were A320 family planes although it also had 28ATR 42 and 72s as well as five Airbus A330s. The airlines placed orders with Airbus for five A350-800s and even for five giant A380 aircraft for intercontinental services. However, none of these aircraft were delivered.

On paper, the airlines was doing everything right. The aircraft were new and comfortable, the food was reportedly decent, there was inflight entertainment and first class, there were even acceptable lounge facilities for premium passengers.

The real turning point came about in 2007 when this airlines bought a small domestic airline. 2008 brought with it a global financial crisis which made things at airlines ever harder to deal with. By 2010, it had cut its fleet down to just 28 aircraft and was starting to haemorrhage money. Payments to employees and creditors started to fail and CEO himself had to pump money into the airline to keep it afloat.

On 20th October 2012, the airline’s license was suspended by the Government agency. It limped on in a state of bankruptcy until finally, on March 2nd 2016, the consortium of banks moved to recover its dues which included a sum of Rs 90000 million owed by CEO himself. He had fled to UK to escape his creditors. Despite an extradition effort by the Indian government to return him to the country, he remains at large, branded a ‘fugitive economic offender’.

ROLE OF CREDIT INFORMATION PROVIDERS :

Mira Inform has most of overseas insurance companies as clients. It had Credit Opinion requests from foreign insurance companies since the airlines was importing oils, spare, components and even aircrafts. The airlines brand was well received and a liberal public sector bank also gave about Rs 6000 mil. just against the brand which has no value today. Throughout its short career, airlines never turned a profit. In some ways this is expected from a start-up airline but as time went on, the debt grew deeper and CEO and his team did nothing to turn the things around which was advised/informed in each Mira Inform’s report, prepared subsequent to 2006. The airlines failed to understand the functioning of key pressure points, both revenue and cost drivers and the need of capital to be able to withstand external shocks. It had bank loans exceeding Rs 70000 million at that time.

OUTCOME

Insurance companies debated a lot against Mira Inform’s moderate and poor rating for this airline since early days. Some even scolded it’s analyst team and argued that rating/scoring is inadequate and not matching with its’ huge brand value. However, every time justification were made for below normal or moderate rating and suggested secured dealings which was not acceptable to most of Mira Inform’s clients. Ultimately, the consortium of banks, insurance companies, employees, suppliers and vendors lost heavily and so far failed to recover a single penny. Mira Inform team did their best and could see disappearing this airlines in thin air.