Kingfisher Airliance - Can still remain King of Good Times??
one of India’s leading privatecarriers — went off on the nightof February 17 when wordspread like wildfire thatsomething was amiss atKingfisher’s Kolkata station.
Earlier that week, the incometax department had frozen theairline’s bank accounts for non-payment of tax deduction atsource (TDS).
By the evening of February 18,the problem had becomeserious enough for the airline toissue a statement. But it wastoo late.
But what led to thelatest edition of thetrouble that hasplagued Kingfisher?
Kingfisher has notched up adebt of over Rs7,000 crore. Justrecently, the airline reported aloss of `444 crore
But how did things come tosuch a pass for Kingfisher, thatalways had the image of apremium airline where thehospitality was king-size.
Expert views..• “Kingfisher got their strategy wrong. Kingfisher lost out since it thought it could capture the market by offering frills,” - A prominent aviation analyst told CNN on condition of anonymity.• “For Kingfisher, it was a mish-mash of business models. Their’s was a flamboyance-based aviation model. Then they acquired a low-cost carrier like Air Deccan but did not leverage it,” - A prominent Analyst
Expert views..Contd..• “There are deeper systemic flaws affecting all carriers which too are responsible.” - Mr. Jitender Bhargava (Former executive director of national carrier, Air India)• “The main problem is that global oil prices have been shooting up. The airlines do not increase fares proportionally due to intense competition among themselves. The result is more losses.” - Civil Aviation Ministry
Kingfisher view..“The airline industry in India is going through a toughperiod due to high costs and lower yields. This isevident from the unprecedented losses recentlyreported. Kingfisher has not made any bailout requestto the Government. We have only asked our banks foran increase in limits due to significant increase inoperating costs caused by increase in fuel prices andrupee devaluation,” - the airline had stated last year.
But just who will the market forcesmake the biggest beneficiary ifKingfisher shuts shop??Low-cost carrier IndiGo which ismaking profits is now viewed as themost successful airline with a soundbusiness model.
Now its time to do whatmanagers usually do …;)
Analysis 1 Indigo Kingfisher Red • 31 destination in india • 63 domestic destination in • Focused & Profit Making india routes • Many Unprofitable routes • Low price compared to like Nasik, Hubli etc kingfisher red • Grounding of 14 aircraft • Low Terminal cost like D1 in • Operation shifted to New new Delhi and 1B in Mumbai Terminal in Delhi & Mumbai • Focus on Low Cost Airlines • Focus diverted from high • Less Turn around time as services to low cost compared to Kingfisher red. • More Turn around time as compared to Indigo
Destination MapTo get more details about route map, You can visitIndigo - http://book.goindigo.in/skylights/cgi-bin/skylights.cgi?module=C3&page=ROUTEMAPKingfisher - http://it.aviate-res.com/kingfisher-airlines/route-map.aspx
Analysis 2 Indigo Kingfisher Red Standardized Aircraft Diversified Aircraft with • Less Inventory Spares different capacities • Less Training Cost • High Inventory Spares • Less Maintenance Cost • High Training Cost • Less Operational Cost • High Maintenance Cost • Effective Terminal Use • High Operation Cost • Easy Scheduling • Scheduling difficult • More Human Resources required.
what is the roadforward for Kingfisheror is it pretty much theend of the road?
FDI / EQUITYIn a recent media interview, Dr Mallya had indicatedthat there were three investors ready to pick up stakein the airline but added that they were waiting forGovernment announcements on FDI to become policy.The government is now set to approve a 49 percentFDI limit for foreign airlines in Indian carriers.
Expert View..“A total and urgent overhaul is needed. Only infusionof more funds can ensure the revival. There has to bea sound and well-thought out business model as theairline cannot afford to go wrong again. Costs havealso to be scaled down. There are too many things tobe done.”Mr Bhargava
My View..Route Rationalization: Cutting back unprofitablesectors and services to several citiesDebt recast: Asking bank to reduce rates or take a cuton loans or find a "local investor“FDI: If the FDI limit is raised and foreign airlines areallowed to buy a stake. Mallya could recapitalizekingfisher.