Tuesday, 23 June 2020

Case Study on Kingfisher Airlines Ltd

Case Study on Kingfisher Airlines Ltd
Introduction 
India's one of the most highly profiled airlines- Kingfisher, has turned into shambles whereas in the market scenario, other competitors of the Kingfisher are flying high.
During the year 2012, Global aviation industry was going through a challenging phase due to ground breaking 
fuel price hike for the last 4 years,tumultuous financial 
markets and economic slowdown. Vijay Mallya’s dream venture, Kingfisher Airlines –widely known as The King of 
Good Times – witnessed its worst phase.
Kingfisher initially launched as the all-economy, with single-class layout aircraft with high quality eatables and 
entertainment systems. Vijay Mallya’s jovial nature, knew well enough how to live the life of a king, and focused only 
on this thought that each air traveler would expect their travel similar to a king’s journey in the Kingfisher Airlines. 
A year later after the airline was set up, the focus shifted to the high luxury class. The airline could not hold stability 
with changing time and ideas of its models and expecting Random expansion. 
Start of the Bad Time 
There was a time when Kingfisher airlines was one of the best rated airline in India and got success in gaining 
customer satisfaction, but it failed to sustain that for a long time.
With the economic slowdown in 2008 and the increasing fuel prices as well as the KFA’s mandatory requirement to provide services on non-profitable routes, the path ahead was full of difficulties. The cash strapped 
Kingfisher airlines was caught in a precarious web and burdened under huge debt, which it owed for airport fees, 
fuel, and salaries to employees, repayment of loans to different banks and service tax.
In Sept 2010, ex-CEO of SpiceJet, Sanjay Agarwal, Joined Kingfisher Airlines and Vijay Mallya assumed the 
role of MD and Chairman of Kingfisher Airlines. In September 2011, in order to get along with the cash crunch, 
kingfisher airlines decided to exit Kingfisher Red, which was its low cost segment, but the survival mantra was very late for the ailing airlines.
According to the Kingfisher Airline’s annual report for the year 2011, reasonable doubts over the company's 
existence were raised and it was pointed out that the government money had not been deposited by the airlines, which it deducted as TDS and provident fund contribution, highlighting scruffy financial sustenance of the company. With the passage of time the situation of the company got worse, leading to termination of international flights and 
cancellation of domestic flights, which is still continuing unabated. On 25th April, 2012 its languishing shares hit an 
all-time low of 13.
During the year 2012, losses of over Rs. 7,000 crores were accumulated by the company, with about half of its aircrafts grounded and many members of its staff going on strike. As all its operation suspended, the airline came to a 
halt.In view of these predicaments, Vijay Mallya appealed the government for a bailout, but was refused the same. 
DGCA suspended its flying license on 20thDecember 2012, and the airline had to shut down its operations.
Causes 
There was the severe need to identify airline cause for distress considering financial and operational issues to 
ensure safety functions don’t get affected. The possible unfavorable trends in the operator’s financial state could include:
1. Decrease in safe operating standards or evidence of 
cutting corners.
2. Fall in training standards.
3. Significant turnover of personnel.
4. Delayed meeting payroll.
5. Insufficient aircraft maintenance.
6. Storage for supplies and spare parts.
7. Decrease in frequency of flights.
8. Sales or repossession of aircraft and other major equipment items.
Reasons behind the Downfall 
Till December 2011, KFA was considered among top 5 passenger airlines in India but after that it suffered high losses, heavy debts and finally shutdown in 2012. From the data collected, it depicts that there are more business reasons as compared to marketing reasons behind the failure of KFA.
The main marketing reason responsible for the decline was the merging of KFA with Air Deccan and starting of 
Kingfisher Red.
Worst Decision Made
In 2007, KFA merged with Air Deccan that was a low-cost-carrier that charges low fares while kingfisher was a high 
cost carrier that was known for its luxury. Kingfisher thought that Air Deccan was in market before it so it would uplift the financial position of the company and another reason was that Kingfisher didn’t have 5 years of domestic experience but Air Deccan had and to get international 
license in aircraft it must have 5 years of domestic experience that is why it acquired Air Deccan.
After merging with Air Deccan there was introduction of Kingfisher Red in 2008. But this business strategy caused 
confusion in consumer’s mind because the KFA passengers were used to the luxury provided like cuisine and lounge 
access etc. The merging degraded the brand status of KFA and the company lost its premium value.
Strategic Issues
1. The major mistake committed by Mr. Mallya is that he failed to make proper decisions. He failed to understand 
the requirement of consumers and made all decisions on the basis of luxury sells. For him airlines were considered to be a luxury travels but in India only selected classes were ready to pay extra for luxury. 
2. Mallya being a liquor tycoon was unable to identify the differences between the two industries. Customer might pay extra for alcohol but not for transport, because transport is type of necessity than luxury.
3. In 2008 Deccan airlines was rebranded as Kingfisher 
Red by Mr. Mallya. So Kingfisher Airlines operated both business and economy class airlines. This looks perfect but wasn’t actually. Mr Mallya was in different businesses at the same time. For his liquor business officials were appointed but for airlines all was going 
by itself. The business needed the attention of Mr Mallya. 
4. According to reports, 366 domestic flights, 20 international flights were flown by KFA. It also owned 67 aircrafts. This increases aircraft lease rental. In 2011, 
the lease rental crossed Rs.984 crores and because of this, 66 aircrafts have been grounded. 
5. In 2011 there was a time when Kingfisher was not able to pay the salaries to employees. Salaries were due for 4 to 5 months. After this the employees started refusing to 
sign the mandatory “Tech Log” which states that aircraft is fit and ready to fly. This was noticed by Directorate General of Civil Aviation (DGCA) and they 
cancelled the license of KFA.
Conclusion 
Indian airline business has seen ideal growth and revolution which will go on in coming years. Many airlines come and 
go while the others have gained a strong ground in this business. The grand and ambitious Kingfisher Airline’s project suffered huge downtime due to improper strategic decisions and mismanagement by the group. Instead of trying to utilize this grand airline project opportunity, Vijay Mallya focused to achieve a glamorous status. The airline became for the luxurious design, food and ambience 
including big goals for settling in international market but neglected the basic economic class. The strategy practiced by Vijay Mallya could not sustain for long and proved to be 
a great threat at a large scale to both, sustainability and stabilization of the aviation sector. Mallya is now the only 
board member left holding on to the brand. For a business to be successful the main focus should be on creating an efficient work-frame, taking appropriate 
decisions, establishing healthy competitive environment, improving quality of service and standing in unity to find best solutions to problems. 


Nisha Jain [MBA FA]
Manager Fintech
Aircrews Aviation Pvt Ltd
http://www.AircrewsAviation.com
nishajain.aircrews@gmail.com
aircrews.nishajain@gmail.com
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