Business ethics and leadership

Case study on kingfisher airlines

Members
 Ayushi Anand
 Rahul Sinha
 Shashi Sangeeta
 Sneha Singhania
 DECLINE
OF
KINGFISHe
 Introduction
Ethical issues are becoming a serious concern in any
kind of business organization. People would find few
coverage of an ethical issue sometimes just by
browsing through the daily newspaper (Carroll, 2013).
Basically, there is no shortage of the stories on several
ethical issues. Therefore, this study has basically aimed
to cover some of the ethical issues that the Kingfisher
airlines as well as Vijay Mallya have been faced.
 background
Kingfisher Airlines Ltd. (KAIR) is a private airline based in
Bangalore, India. Currently, the Indian carrier is struggling with
a cash shortage and losses, it will end international flights and
cut many local routes as it seeks funds to revive operations.
KAIR is India's largest domestic airline. Owned by Vijay Mallya
of United Beverages Group, Kingfisher Airlines started its
operations on May 9, 2005, with a fleet of 4 brand new Airbus -
A320. He took over the UB Group even before he turned 30
after his father, Vittal Mallya, passed away suddenly in 1983.
Since then, he has consolidated the group holdings, shed those
companies, including a car battery making venture, won a
 facilities
Retrospection on Kingfisher Airlines history proves that it was
a stiff competition for other domestic airlines of India. It
provides :
• Brand new aircraft, stylish red interiors, stylishly dressed cabin crew
and ground staff added to glamorous flying.
• The airline introduced in-flight entertainment (IFE) systems, for the
first time to Indian consumers. The IFE systems were provided on
every seat, even on the domestic flights.
• Facilities like personal valet at the airport to assist in baggage
handling and boarding, exclusive lounges with private space,
accompanied with refreshments and music at the airport, audio and
video on-demand, with extra-wide personalized screens in the
aircraft, sleeper ette seats with extendable footrests, and three-
course gourmet cuisine.
 REASONS FOR THE DOWNFALL OF
KINGFISHER AIRLINES
Frequent Changes On Focus
Kingfisher first launched all economy class with food and entertainment
system, later on, they shifted focus to luxury business class on their
aircraft, a lot of air travellers appreciated the hospitality, aircraft condition
and it’s ambiance when Kingfisher focus was on luxury.
After acquiring the Air Deccan they suddenly shifted focus on low-cost
air traveling, frequent changes in the hospitality and aircraft ambience
made travellers lose their interest in the brand, they didn’t focus on
highly profitable routes in domestic area, acquired Air Deccan air crafts
use to run at the same time as Kingfisher airlines, there was no
proper syndication between Kingfisher Lite & Kingfisher Airlines.
Mr. Gopinath who is ex-founder of Air Deccan expressed his view that
Acquisition For Expansion
Kingfisher airlines acquired the Air Deccan for the sake of
expansion, as per the international airline policy,  any airline
s should have minimum five years of domestic experience in
their respective area to get the international routes license, for
the sake of international route license  Kingfisher acquired the
Air Deccan, they never tried to syndicate these two companies
to improve their profits with its merger.
Without stabilizing in the domestic market to know the ground
realities of the airlines industry, Kingfisher stepped into the
international routes where the competition is very high
compared to the domestic airways, when they planned about
the international routes they hardly have three years of
Economic Slowdown
Another external factor for the Kingfisher downfall is economic
slowdown in 2008, Kingfisher first started it’s international route
from Bangalore to London in
2008, same year recession affected the whole world,
which is indirectly affected the air travel occupancy in
international routes, because of the recession, airplane
fuel prices raised, airport charges for landing are very
costly in international airports around the world.

Lack of Management
There was no single CEO continued for one year in Kingfisher
airlines, there was a frequent change in the top level
management, Mr. Vijay Mallya never taken any serious
interference in day-to-day operations, Kingfisher was a gift to
The company not even thought of making Mr. Gopinath (Ex
founder of Air Deccan) as CEO of the Kingfisher airlines to
bring the company into a profitable business, lack of proper
expertise and experience in the airline industry.

High Operational Cost

Operational costs of the airline industry are very high
compared
to any industry, companies have to buy the licenses for the
routes,
companies should invest in the aircraft maintenance,
salaries for the
employees are very high.
Airports charges fees for landing and parking, aircraft fuel
frequently changes as per the international crude oil rates,
Employee retention
With increasing debts and the declining trend in the aviation
industry, KFA failed to deliver its services and it was not able to
pay back salaries to its employees. In the past few months
over 60 pilots have resigned their jobs which crumpled their
operation leading to reduction of flights from 400 to 170 flights
per day.
Chairman Vijay Mallya's communication to the employees
conceals more than it reveals. While he claims over 75 %
staff have been paid, he conveniently ignores the fact that
he has still to pay four months' salaries to them. Now we
have come to a situation where we are left with no option
but to move the labour court over the issue," airline sources
Financial crisis
1. Financial Crisis Ever since the airline commenced operations
in 2005, it has been reporting losses. After acquiring Air
Deccan, Kingfisher suffered a loss of over 1,000 crore
(US$199.5 million) for three consecutive years. Payment
problems(Delayed salary, Fuel Dues, Aircraft lease rental dues,
Income Tax, Non-payment of dues to lenders).

2. The aviation ministry has, however, made it clear

it will not pull the plug on Kingfisher, which has a
debt of over Rs 7,000 crore with banks - mostly
public sector banks - and its total liabilities-cum-
losses are over Rs 10,000 crore "It is not up to the aviation
ministry to shut down Kingfisher as the government is not keen
on such a move. If Kingfisher closes, uncomfortable questions
Will kingfisher bounce back 
Vijay Mallya Says, “ We have funds stuck in various accounts
(over 50 accounts were frozen) and as each account has been
de-frozen and we have access to our funds, the immediate
priority is to pay salaries”(april)

He is willing to take suggestions from lenders on possible

management or board changes to revive the flagging airline.
He is also talking to potential strategic and non-strategic
investors and looking forward to the government notification
on allowing foreign airlines to buy an up to 49 per cent stake
in domestic airlines.
NOW THE HOUSE
IS OPEN FOR
QUESTIONS
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