Asia Pacific Institute of Management

12th Dec 2013

Rise and Fall of Kingfisher Airlines A Project of Marketing Management 2

TV, Shreeharsha;Karmakar, Ankit; Pandey, Prabhakar; Shukla

Mritunjay; R, Nithin; Mishra, Devendra

2

Abstract Kingfisher Airlines Ltd. is an Indian private airline group widely unpopular for its perennial loss ridden

balance sheet and the eventual financial meltdown. Kingfisher Airlines started operations in May 2005

and soon grew to become the largest passenger carrier in the country. Financial mismanagement, over

personal indulgence, lack of respect for the business and naïve ambition led to its sad demise. Kingfisher

may have failed due to bad financials but was there a marketing failure? Are promotion and USP enough

to sell air tickets? The project talks of how Kingfisher Airlines grew into the biggest player in Indian

domestic airlines and how naïve ambition, poor market research and lack of clarity nailed the metal bird

to the ground. This project proposes a few recommendations of alternatives from the marketing

perspective that can be explored if in case the Airline is revived into operation.

3

Table of Contents

1. Introduction 4

2. Coming Together 5

3. Marketing Mix 6

4. Strategy 8

5. Falling Apart and the Factors Responsible 9

6. Exploring Alternatives 11

Conclusion 12

Bibliography 13

Appendix 14

4

Introduction

Kingfisher Airlines was established in 2005 by the flamboyant liquor Baron Dr. Vijay Mallya. Vijay

Mallaya was quoted to say that he wanted to break the shackles of conservative socialism and wanted

to give the middle class a standard of living that is enjoyed in the west. Born to the illustrious Vittal

Mallya, Vijay Mallaya inherited the ownership of the UB group when he was barely 30. Mallya

consolidated the group’s businesses and streamlined them into a profit making enterprise.

Kingfisher Airlines was an attempt of Vijay Mallya to provide an experience of leisure and luxury to the

common man of India. Kingfisher Airlines started modestly and took off very soon to become a giant in

the Indian Airline Industry. The Airline went through many stages of both organic and inorganic growth.

Growing its assets and also piling its liabilities.

The Airline never reported profits in its balance sheets after its listing in the Indian stock markets. This

trend of loss making continued and saw the Airline touchdown. Mounting Debts, continues losses,

hostile competition and lack of government aid together made sure that the Airline stood grounded

forever.

5

2. Coming Together

Birth of Kingfisher

Kingfisher Airlines Limited was setup in 2003 at a Registrar’s office with its registered office in the UB

City Bangalore. The cheering and the beautiful ladies in red were only to come in 2005. Kingfisher

Airlines started its operations on 9th May 2005 with a modest fleet of 4 Airbus A320-200s; the inaugural

flight being from Mumbai to Delhi. Kingfisher Airlines closed the year with an income of INR 13.5 Billion

but still suffered a loss of INR 3.4 Billion.

The Early Days

Brand Kingfisher was starting to come into piece. Models like Yana Gupta posed in Red which would

remain to be an icon for years to come. In December 2006, Kingfisher announced that it would provide

in flight entertainment. This was curtsey of a collaboration with the Z network’s Dish TV DTH service. By

this time Kingfisher Airlines had a fleet size of 34. This was also the time when Vijay Mallya and his

managers came up with the plan of acquiring Captain Gopinath’s low cost carrier called Deccan Airlines.

Large Strides

Since June 2007, things started looking up for Kingfisher Airlines. Kingfisher now possessed 41 Aircrafts

and a schedule of 255 flights. By the end of 2007 and all the deliberations and hesitations, Kingfisher

Airlines finally acquired Deccan Aviation on 19th Dec 2007. The income at the end of the year was

recorded at INR 15.4 Billion and accounted to a surprisingly small loss of INR 1.8 Billion.

With the onset of 2008, Kingfisher Airlines became the largest passenger airliner in India. With a fleet

size of 77 aircrafts operating 412 domestic flights everyday Kingfisher had become a giant in the Indian

Airline Industry. Kingfisher had now started offering 3 classes of travel: Kingfisher First – the premium

business class, Kingfisher Class – Premium economy, and Kingfisher Red – the low cost service.

Kingfisher Red was just a new name for Air Deccan.

2008 came to see another large step taken by Kingfisher Airlines. They started operating on

International routes. This was facilitated by the courtesy of the merger with Deccan Airlines which was

in the Airlines industry for over 5 years.

By the end the FY2009, Kingfisher had made its name as the Five Star Airline of India and had been the

only Airline to be rated as such. The revenue rose that year because of the combined revenue of

Kingfisher and Air Deccan. It reported an income of INR 55 Billion, but the losses also had grown to INR

16 Billion. Many believe Acquiring Air Deccan was the first big mistake or in other words the beginning

of the end for Kingfisher.

6

3. Marketing Mix

Product

Core Air Transport

Supplementary

Food on Board Complementary Gifts In Flight Entertainment

Augmented

Online Booking Pick up and Drop Service Meal Choices Mobile Ticketing

T01

Price

Kingfisher Airlines provided all its additional services and still managed to price its tickets at a

competitive price and not too far away from the industry standards. Pricing was done based on the

class, date of travel, day of travel and frequent flyer program.

Place

Distribution channels, in this case are the ticketing channels were online ticketing, mobile ticketing, tour

operators and travel agencies across the country. Apart from these channels, Kighfisher Airlines has its

posh corporate offices across popular downtown locations in different cities of the country.

Promotion

Hoardings across popular places in big cities, Media and press releases, TV channel of NDTV Goodtimes,

Brand ambassadors and Kingfisher calendar were all used to promote KFA. Kingfisher also sponsored

sporting events and the line ‘Fly Kingfisher’ because symbolic of kingfisher ads.

KFA sported its ‘5 star’ facilities across ads, provided special offers and held the ‘king club’ program for

frequent flyers.

People

All employees sported the Red of Kingfisher. Ground staff, support staff, cock pit and flight crew were all

highly motivated and posses advanced analytical and technical skills. Some of them were sent abroad for

training and induction program.

The front line staff possessed ‘empathy’ while dealing with the clients. Kingfisher Airlines believed that

people was the most important P in their operations.

7

Process

Kingfisher was a heavily system oriented process. The process started with the booking channels,

confirmation, check in, boarding, baggage claim to cancellation and rescheduling of tickets.

Kingfisher followed a processed that allowed them to charge very little on cancellations and it provided

the clients with the option of rescheduling and editing the status of their reservation status.

In flight entertainment, reading, amenities and complimentary gifts were all intended to make the flight

as luxurious and comfortable as possible.

Physical Evidence

The aircraft itself was is a piece of physical evidence. The check in counters, run way ferries, in flight

equipments are all part of the physical evidence. The booking offices, airport lounges, aircraft amenities

and interiors all contribute to the physical evidence.

Seating arrangement selection facility while booking tickets through online portals is a reference to

physical evidence.

8

4. Strategy Kingfisher started off by introducing premium flying experience in domestic travel in India for the first

time. The events that occurred in Kingfisher’s journey are enlisted in the table below.

Existing Product New Product

Existing

Marke

t

3. Deccan Airline Takeover 2. In Flight Entertainment 4. Increase Fleet and Destinations 6. International Operations

New

M

arket

1. Premium Flyer 5. Three different Classes KF

T02

The table shows how Kingfisher zigzagged across the Ansoff Matrix in always trying to do something

bigger. The fall of Kingfisher is sometimes attributed to this attitude of always wanting to grow.

1. Premium Flyer – Kingfisher tried to start something new that was not famous or familiar in India.

2. In Flight Entertainment – KFA tried to improve the flying experience of its customers.

3. Deccan Airlines Takeover – Kingfisher tried to grow inorganically and made an attempt to enter low

cost flyer market.

4. Increase Fleet and Destinations – To improve its quality of service and grow its market share.

5. Three Classes of KFA – Since KFA found itself in the middle of 2 different business models, it planned

on operating different things differently and diversified itself.

6. International Operations – An attempt at product development, it wanted international operations by

its name. More than making a market for itself internationally this was about setting this up as a feather

in the cap.

9

5. Falling Apart and the Factors Responsible

Naïve Ambition

The flamboyant confidence of Vijay Mallya led him into the airlines industry unarmed and unaware of

the risks and mitigation plans. Coming from a liquor business that had a turnover profit of 20-30% he

expected over night profits in a business where 3% profit was an accomplishment. This underestimation

will be a hard learnt lesson.

Continuous Losses and Mounting Debts

Kingfisher’s bad spree continued into the years following the merger with Deccan Airlines. Analysts

called the merger to be the first mistake of Mallya. The liabilities increased and so did the losses. The

idea of launching Kingfisher Red was a complete flop. The share holders of Kingfisher had started losing

their patience in Kingfisher, they had not receive a dime of dividends from the company.

Year Total Current

Assets (Cr INR)

Total Current Liabilities (Cr INR)

Current Ratio = TCA/TCL

2002 5.83 4.33 1.346

2003 8.66 7.73 1.120

2004 32.34 25.72 1.257

2005 91.75 108.77 0.843

2006 251.49 434.05 0.579

2007 518.91 449.15 1.155

2008 81.64 687.31 0.118

2009 426.5 3814.63 0.111

2010 538.28 3908.03 0.137

2011 716.36 4483.46 0.159

2012 574.56 6046.66 0.095 T03

It was in 2011, that Kingfisher first admitted they were having financial issues, soon it was realized that

the company had not been able to pay its dues to the oil companies. Kingfisher maintained that it was

because of the rise in the general prices of fuel and the company would stabilize once the oil prices

stabilized at a range.

The Jan of 2011 brought the bad news from SBI, the consortium leader had declared that Kingfisher had

become an NPA. Kingfisher owed SBI an amount of INR 14.5 Billion. What followed was a series of job

cuts and hunger strikes by its employees.

Authorities at different banks and investors said that Mallya and his managers would always have an air

of poised arrogance in them. They would look confident and confidently accept that they had no money

10

and we’re looking for investors. The big bosses had confidence in the passing of the FDI act and that

they would be able to rope in a few names from abroad.

Hostile Competition and Government’s role

Airline industry is no doubt a very competitive industry, but for Kingfisher Airlines, their counterparts

have been really intolerant and unyielding when it came to carrying Kingfisher flyers in case of

cancellations and reschedules of Kingfisher flights. It is also widely rumored that bosses of certain

airliners conspired to make Mallya unpopular among the Middle Eastern airliners.

When it came to the government, there was an untold protective attitude towards Air India and a step

motherly treatment towards the private players, more so in case of Kingfisher as it was backed by a

stern boss who wouldn’t consider anything above his reach. Mallya banked heavily on passing of FDI but

sadly for him the time taken by the cabinet to pass the FDI act was longer than the patience his investors

had.

Lockout and License Suspension

Entering 2012, the bookings dropped to near zero numbers and Kingfisher had a hard time even paying

off the insurance premiums for their aircrafts. By this time, Kingfisher Airlines employees including Pilots

and ground staff had not received salaries for over 6 months; they had resorted to calling in hunger

strikers and boycotts. Mallya and his managers would time and again hold meetings to promise and

convince the staff about their salaries being paid off soon, but little else did they receive.

By August 2012, Kingfisher Airlines had a dismal fleet size of 6 and a meager 25 destinations on its

schedule. It had seen such bad days that they couldn’t pay Airport Landing charges in the airports of

Delhi and Mumbai. October 2012 saw the official suspension of all Kingfisher Aircrafts. The operating

license of Kingfisher Airlines was finally revoked in Feb of 2013.

11

6. Exploring Alternatives

Financial Bailouts

The SBI being the leader of the consortium of banks that lend funds to Kingfisher holds a major stake in

the Airline, by constructive meetings with SBI and other investors Kingfisher trusts, a deal could be

struck to pump fresh capital from new investors. Suicide investors and investors who buy sick units can

be prospected.

An alternative considered by Mallya is getting his other business establishments to take over some of

the debts from KFA. Analysts don’t really back this decision.

Collaborations

Vijay Mallya is a well connected man and Kingfisher is a very famous name in the world. Now that 100%

FDI is allowed in the Airlines Industry, it shouldn’t be such an uphill task to find investors who would like

to collaborate with KFA. Though collaborating with an ailing Airline means taking over debts, the brand

Kingfisher is big enough to make it worthwhile.

Reengineering

The mistake of envisioning something ahead of its time was what lead Kingfisher to its downfall.

Reengineering its marketing strategy to a market penetration strategy would help kingfisher make a

comeback. Playing by the same rules that every other player plays is what Kingfisher needs right now.

Segmentation and Targeting

The major failure occurred when KFA lost track of who they want to serve. It is an absolute necessity to

select the segment of the airline market they want to target and stop the juggling act.

12

Conclusion

Kingfisher Airlines was started with the just idea of providing a luxurious flying experience to the

growing middle class of India. In a country where air travel itself is considered a luxury, the idea of

providing luxury air travel was a little ahead of its time.

The initial losses were an indication of this, but the lack of patience and the urge to grow faster led to

Kingfisher’s advent into low cost flying, this was a mistake. Changing products and the target market

lead to more avenues to make loss.

Entering international routes without proper consolidation of domestic market was yet another

ambitious move that proved to bear losses. Mounting debts, lack of clarity and hostility from all corners

of the ring pushed Kingfisher to the brink and eventually ended in a lock out.

All is not lost, 100% FDI, government bailout plans and capital pumping from Mallya’s other businesses

can still prove to save Kingfisher Airlines. If revived, Kingfisher Airlines can sustain if it does not lose

focus on its core objective of providing luxury flying experience.

13

Bibliography

1. ‘Kingfisher Airlines – A Case Study’ By Chaahat Khattar, 2012.

2. Kingfisher Airlines BalanceSheet - Moneycontrol

3. ‘Rise and Fall of a Castle in the Air’ By K GiriPrakash, The Hindu, Feb 2012

4. ‘Kingfisher Airlines Case Study – Strategic Management’ By Gaurav Gupta, Feb 2013

5. ‘The real reasons behind Kingfisher’s fall’ Raghuvir Badrinath, Business Standard, June 2011.

14

Appendix

Acronyms

INR – Indian National Rupee

KFA – Kingfisher Airlines

DTH – Direct To Home

NDTV – New Delhi Television

NPA – Non Performing Assets

SBI – State Bank of India

FDI – Foreign Direct Investment

Tables

T01 – Benefits of the Product(service) of Kingfisher – Pg 5

T02 – Ansoff Matrix showing Kingfisher’s developments – Pg 7

T03 – Current ration analysis showing Kingfisher’s Assent Liability ration – Pg 8