7/31/2019 Kingfisher Red
1/1
Why did Kingfisher Red fail?
Owned by Indias biggest liquor baron Mr. Vijay Mallya,
Kingfisher Airlines (KFA) is one of the finest luxury airlines of
India. Based in Bangalore, the KFA started operations in May2005 as
a wholly owned subsidiary of the United Breweries Holding ltd. It
entered the Indianaviation market at a time when the low cost
service model had galvanized the market & made
air-travel accessible to the Indian middle class.The Kingfisher
brand has always been associated with glamour, vibrancy &
lifestyle. TheKFA always focussed on business class passengers who
were willing to spend for premiumservices. Initially KFA offered
unique classes of service Kingfisher 1 st & Kingfisher
Class.The KFA carved a distinct position for itself by its
flamboyant lifestyle image & by offering agreat flying
experience with comfort seating, personalized entertainment &
services to itsguests.
Thereafter the KFA acquired the then budget carrier Air Deccan
in 2007. Initially on itsacquisition of Air Deccan, it retained the
name Deccan in the new entity because of itstremendous value in the
Low cost carrier segment. After a period of time KFA replacedDeccan
with Kingfisher Red. Kingfisher Red highlighted the delight of
flying in spite of offering Low fares, keeping up KFA brand
promise.
With the arrival of many more airlines in the Low Cost Carrier
segment KFA got battered byhuge financial losses & stiff fare
competition in the air travel market. KFA announcedrecently that it
has decided to eliminate Kingfisher Red service in an effort to
control costs &get a handle on the airlines mounting debts.
This move ends a dismal four year experiment inthe no frills market
for KFA which formed Kingfisher Red after acquiring budget
carrier
Deccan in 2007.
A look at the balance sheet of KFA for the past 3 years does not
give the break up forrevenues & expenditures incurred on KF
Red. In view of the same the explanation given byMr. Vijay Mallya
that Kingfisher Red operations were a bottleneck in the growth of
theairline which does not hold good. It has been commented by most
analysts that KFA wasnever run professionally & its dismal
performance is on account of its flamboyant style of functioning.
The airline has not been able to cope up with the competition from
other lowcost operators. There has also been a mass exodus of
experienced flight crews which clearlydemonstrates lack of
confidence in the airline & may actually become a bigger
problem. The
KFA has always been defaulting in payment of fuel charges very
frequently. With all thishappenings the KFAs optimistic plans
appears to be a gamble against impossible odds. Its only a matter
of time now that KFA might be eventually put on sale or may go
intoliquidation on account of other factors also like mounting of
debts & inability to service thempromptly.
