BUSINESS CASE STUDY

KINGFISHER AIRLINES LIMITED

INTRODUCTION

Kingfisher Airlines Limited is an airline group based in India. Its head office is in Andheri (East), Mumbai
and Registered Office in UB City, Bangalore. Kingfisher Airlines, through its parent company United
Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red. It is India’s fifth largest passenger
airline that primarily provides national and international, short and long haul, high‐frequency, medium to
high fare service. Kingfisher Airlines was established in 2003. Kingfisher Airlines which is a wholly owned
subsidiary of UB Group Ltd. ever since its launch in May 2005, had pioneered a range of market-firsts that
had completely redefined the entire experience of flying. Kingfisher Airlines was the first Indian airline to
introduce in-flight entertainment (IFE) system on domestic flights. The airline started commercial
operations on 9 May 2005 with a fleet of four new Airbus A320‐200s operating a flight from Mumbai to
Delhi. It started its international operations on 3 September 2008. In May 2009, Kingfisher Airlines carried
more than 1 million passengers; giving it the highest market share among airlines in India. Kingfisher also
won the Skytrax award for India's best airline of the year 2011. Kingfisher Airlines is also the sponsor of
F1 racing outfit, Force India, which Vijay Mallya also owns. In June 2005, Kingfisher airlines was the first
and only Indian airline operator to order five A380, Five Airbuses A350- 8—aircraft , and five airbuses
A330-200 aircraft worth $3 billion . In 2007, Kingfisher Airlines merged with low-cost carrier Air Deccan
increasing its total market share to 20.8% and thereby starting its international operations on September
2008 by connecting Bengaluru with London.

BUSINESS GROWTH / OPPORTUNITIES:

Kingfisher Airlines took over low-cost carrier Air Deccan in 2007. Kingfisher Airlines got Air Deccan’s
huge market share and several aircrafts as well as an immediate listing of the airline. It also availed the
license to fly on international routes, as Air Deccan had been in the business for more than five years.
Kingfisher Airlines’ merger with distraught budget carrier Air Deccan gave Kingfisher prompt control over
29% of the domestic passenger market to meet arch rival Jet Airways head on, as Air Deccan had a domestic
market share of 19% and a passenger base of three million by June 2006, but also acquired the losses
incurred by Air Deccan, since financially the carrier wasn’t in a sound position. After the merger with Air
Deccan, Kingfisher selected to give up the cost efficacies, which the acquisition brought in; instead the
airlines encompassed the inadequacies of a full service model. Kingfisher gave up the web ticketing system,
and extended all bookings through global distribution systems. Other low cost carrier tactics like keeping
overhead costs reduced by flying a single class arrangement of aircraft , quick aircraft turnaround, selling
tickets online, selling of food on board were never assimilated into the main operations of Kingfisher
Airlines. Kingfisher was propelled as an all economy, single class arrangement aircraft, with food and
entertainment structures. After about a year of operations, the airline abruptly shifted its focus to luxury
and subsequent to its merger with Air Deccan, launched its international flights as well as low-cost services.
Kingfisher had too many changes in their business model and approaches that led to strategic failure and
this had major influence on the airline because haphazard expansion didn’t give time for the airline to
stabilize. Kingfisher at present needs USD 400 million with the carrier seeking more bank loans to support
its operations, and the airline will also require over USD 800 million to fully finance its business plan.

CHALLENGES / FAILURE:

KFA is more of a business failure than a marketing failure. The only marketing failure that can be
find out in the entire gamut of things was the takeover of Air Deccan and formation of Kingfisher
Red and thereby diluting the brand value, KFA stood for.

● Competition: Aviation Industry is presently in the state of more supply and less demand. Indigo,
Spicejet, GO Air offer comfortable flights at the same time as Kingfisher did. They were almost as
old as Kingfisher Airlines but what new about them was that they had restructured themselves with
time but had always stayed on course with it comes down to business model. There is still a big
class of people who prefer to travel by Indian Railways and therefore the strategy of Kingfisher
was more suited for the Business class customers.
 ● In-flight interruption: Unlike road or rail transport, where there’s much of scenery around to
keep you busy, flights are usually boring. Much of the travel through flights between metros is
covered in less than two hours. In-flight entertainment or a movie is started only after the seat-belt
signs are off. And then there’s interruption of meals being served. Most passengers on domestic
flights are not looking forward to in-flight entertainment. Offering in-flight entertainment to keep
one busy for two or more hours was/is a smart move, but it adds up to infrastructural costs. A tie-
up with Dish TV for live entertainment meant installation of more than 50 customized dishes on
aircrafts. Offering free headphones was also an added cost for the company.

● Acquisition of Air Deccan: Kingfisher Airlines decided to introduce Kingfisher Red and then it
automatically entered into a price war against all other carriers especially domestically. Airline
business has extremely long gestation periods. Finally in February 2012 the brand Kingfisher Red
was officially declared non‐functional, marked one of the biggest examples of failed consolidation
and became a landmark failure in terms of mergers and acquisitions.

● Fair fares: While KFA truly offered a premium and luxury service it took pride in calling itself a
budget airlines. It refrained itself from calling itself an LCC (Low-cost-carrier) as though its fares
were higher than the LCCs, it kept its fares lower than Jet Airways, Indian Airlines (now Air India)
and the erstwhile Sahara.

CONCLUSION:

Airlines industry has always been a very challenging one to operate in. Very few companies are actually
earning profit in this industry. Kingfisher Airlines, a dream venture of Vijay Mallya also ventured into this
industry to make a difference and to redefine the experience of flying. But Kingfisher Airlines once known
for its premium quality and class is in the deep crisis now and is actually struggling for its space in the sky.
Kingfisher Airlines' billionaire chairman continues to own one of the world's most expensive yachts, a
luxury Kingfisher villa in Goa, and dozens of vintage cars worth millions, and a cricket as well as a Formula
One team. His $4 billion group comprising breweries, biotechnology and real estate businesses continue to
remain technically unaffected. Kingfisher Airlines in now continuing on its previously stated “Holding
Plan” with a limited fleet and simultaneously progressing on its aircraft reconfiguration plan to contain
losses in this very tough operating environment for the Indian aviation industry. The company has a focused
fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months backed by a
recapitalization plan that the company is actively pursuing and confident of achieving. India will not renew
Kingfisher Airlines’ license to fly if the ailing carrier fails to provide a turnaround plan by end December.
The government is now concerned about how the cash-strapped carrier would pay the salary dues to
employees and the dues to its service providers, including airport operators, aircraft lessors and oil
companies.