Saving the king of good times

When Kingfisher airline started in 2005 it generated widespread curiosity. The curiosity was understandable. The brand was and is extremely popular especially among young Indians due to a strong association (Kingfisher beer is extremely popular in India). Kingfisher stood for everything premium and people expected the same from the airline. Operationally the airline started off as a fully web based booking platform like Air Deccan. The airline bypassed the conventional GDS (global distribution system) an interface which helps B2B transactions between travel agents and airlines. This also meant huge savings on GDS hosting costs. However, it soon back tracked and hosted itself on major GDSs. Being absent from the GDS probably put the airline in the same league as a low cost carrier (which Kingfisher was not willing to be positioned as).

Kingfisher was soon India’s first and only five star airlines. Passengers were called “guests”, red carpet was literally rolled out for business class passengers and economy class passengers had the privilege of in-flight entertainment and got a takeaway travel kit. Operationally Kingfisher did a spectacular arrangement of tying up with then Indian Airlines for its ground handling services. This meant getting airport facilities at par with the national carrier. For example in Delhi the airline operated from terminal 1A, which was much less busier than the chaotic terminal 1B. The domestic network expanded quickly and Kingfisher was talk of the town. Industry experts predicted that Kingfisher will bleed other airlines and soon be the numero uno in Indian skies. Sadly things did not go the way they were projected.

What went wrong?

Buying out Air Deccan and the global financial crisis of 2008 together sealed the fate of Kingfisher. Air Deccan which was supposed to give access to international operations to Kingfisher proved to be a liability instead. Poorly managed and with poor service standards, Air Deccan sapped Kingfisher of its finances and energy. Kingfisher Red (rebranded Air Deccan) created confusion and brand ambiguity. Once known for its premium service Kingfisher Red was not same as flying Kingfisher. The airline started losing its five star image. It was a low cost airline after all. Kingfisher’s international network, which was supposed to grow rapidly, did not grow. Whatever international flights the airline started was on extremely competitive routes like London Heathrow, Singapore, Hong Kong, Bangkok and Colombo, resulting in low yields. The airline also ordered a large fleet from Airbus including an A380 super jumbo, which further pressured the balance sheet.

The present state of the airline can be blamed on a few bad decisions like slow network expansion, inefficient fleet utilisation and brand confusion with induction of Air Deccan. In the last couple of months the airline has been hit by serious challenges. Accounts being frozen by tax authorities, suspension by IATA (International Air Transport Authority) for non payment, cash and carry operations by airport operators and oil companies, strike by cockpit and cabin crews, mass cancellations, etc. None of these stand for a five star airlines. Reputation of the airline has taken a serious hit and market share has been lost to rivals like Indigo, SpiceJet and Go Air. It is time for the airline to do some destructive innovation.

Time for housekeeping

Its time to fill the empty seats

First of all Kingfisher has to come out of the denial. The regular press statements coming from the airline assuring passengers that everything is fine reflects a deep sense of denial. Such statements will further damage the image of the carrier. The next step should be to cut the flab. Kingfisher needs a lean top management team which can multitask efficiently. A complete overhaul of its schedule is urgently required. It should look at reducing the number of destinations offered and fly only on sectors which it has at least breakeven operations. It should also reconsider its international operations. Flying on highly competitive routes will only reduce yields and further pressure the finances. Untapped yet fast growing markets like Indonesia should be considered. Indonesia and Malaysia offer both O & D (origin and destination) traffic and huge potential of transfer passenger to the Middle East via Delhi or Mumbai. Reducing the fleet by leasing out aircraft or selling them will reduce costs in short term. This will also reduce operational and maintenance costs.

Kingfisher needs cash urgently. Reports suggest that it might get emergency funds from investors; however with current operational set up there is hardly a business case for investment in the airline. Kingfisher needs to do a lot of housekeeping to become attractive for an investor. The policy change allowing FDI (foreign direct investment) in Indian carriers by foreign carriers beyond 25% seems a distant dream, especially after a poor show by the party of current aviation minister in recent elections. Even with a quick decision on the topic it will take months for the policy to fully come into force and for an airline to make up its mind to invest in India. Kingfisher should make use of this time to tidy up and get ready for potential investors.

The fundamentals of Indian aviation industry are still strong and growth will continue in the long run. What the industry needs is efficient management and self regulation. Predatory pricing seen in the Indian aviation industry of late will not help anyone in the long run. The ministry of civil aviation should further liberalise the sector by making it easy for airlines to operate in an unconstrained environment. The king of good times is in a gloomy mood these days, cheering it up will be a long process but not impossible.