Bad time continues for King of Good Times!

Author: S. Arun Kumar, Assistant Professor, SMOT School of Business, Chennai

Kingfisher airlines, an Indian based airline group which is owned by Mr. Vijay Mallaya, who is always been associated with luxury, extravagant lifestyle and vibrancy. The parent company, United breweries Group is third largest sprit company in the world. He is also known for owning one of the world's most expensive Yachts, Formula One team and IPL Royal challengers team. A general perception prevails among stakeholders, such that ‘Luxury’ and ‘Vijay Mallya’ are always associated with each other.

Kingfisher airlines (KFA), a brand known for its luxury; glamour and its premium class positioning in the airline industry. KFA acquired Air Deccan which is a LCC (Low cost carrier) and Air Deccan has been renamed Air Deccan as Kingfisher Red.   

This article focuses on the reasons and the major areas where KFA failed to focus and they have been summarized below. 

Increasing Debts:    

                                                                                                                          

Though Kingfisher Airlines had a luxurious positioning in consumer’s ‘share of mind’, it always failed to attract good investors since its inception. KFA suffered from huge debts and it failed to pay back AAI (Airport Authority of India) around Rs. 840 crore in the year 2008, currently it owes around Rs.3,000 crore to AAI. The downtrend in the aviation industry started only since 2011, but Mallya failed to pay debts even since 2008, shows his poor commitment to the stake holders. KFA owes Rs.2,000 crore to its vendors and suppliers which further worsens the situation to continue its operations.

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 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.

Declining Trust

KFA failed to deliver the trust among the customers, shareholders, suppliers and even the government authorities. Even the government was not willing to bail out KFA from the financial crisis.

Brand Conflict

Kingfisher airlines, a premium class category in the airline industry acquired a low cost carrier Air Deccan. This led to brand conflict among the customers, and brand association miserably weakened since acquisition. People failed to differentiate the services of Kingfisher Red and Kingfisher which diluted the existing brand equity.

Acquisition during poor financial health

Decision to buy Air Deccan which was already suffering from low customer turnover was a wrong move. Acquiring a company with weak balance sheet and a flanker product brand led KFA to further suffer from financial losses. 

Economic Slow Down

The global economic slowdown and corporate trying to cut flight trips to reduce their costs are one of the major reasons for industry to collapse. The increasing fuel costs and the operational costs have pushed KFA to reduce their high end services to customers.

Failure to focus on ‘Points of Parity’

The ‘points of parity’ for an aviation industry is to deliver services at an affordable cost and maintain punctuality. KFA failed to deliver both, KFA focused only on higher order needs of the customer like travel delight and in-flight experience and failed to deliver common services like safety, comfort and economy pricing to cater Indian customers.