Collapse of Kingfisher Airlines
Collapse of Kingfisher Airlines
Kingfisher , Sony and Kodak have one thing in common . i.e. They are finding it difficult to reinvent themselves. They are trying hard to be a phoenix but will they truly rise from the ashes or simply fade away is the real question.
Let us take the issue of Kingfisher here. One of India’s most high profile airlines few years back , now in shambles. It is really interesting to ponder that in same market scenario, one of the competitors of Kingfisher is flying high and high. Yes, Indigo Airlines is the most profitable airlines in India. The question is the difference between discipline or grandeur. What makes one company succeed, while another, in the same operating environment, falter? One of the reason is Mr. ( or Dr. in which degree?) Vijay Mallya flamboyant nature.
Kingfisher was launched as an all-economy, single-class configuration aircraft with food and entertainment systems. After about a year of operations, the airline suddenly shifted its focus to luxury. When an airline keeps changing its model and takes to random expansion, there is no time for the airline to stabilize. After Kingfisher’s plunge into luxury came its next folly—a merger with Air Deccan, an airline formed by Captain G R Gopinath in 2003. I believe the fall of Kingfisher airlines started the very day when they bought Air Deccan. Capt. Gopinath , the owner of Air Deccan can be termed as shrewd but smart investor who knew when to part with his investment , just at the right time. The all-economy configuration of Air Deccan was rebranded and called Kingfisher Red, which continued to operate as its low-cost wing till recently.
Kingfisher ended up spending Rs 550 crore on an airline that had losses of over Rs 550 crore. It is widely believed that Kingfisher merged itself with Air Deccan so that it could classify as an airline with five years of domestic flying in 2008, thus fulfilling requirements to fly international routes. The fact that Jet had meanwhile swallowed Air Sahara didn’t help, fuelling a competitive race to be the biggest airline around. Essentially, jet fuel prices began to sky-rocket and soon touched $150. Then came the 2008 recession that made fundamentals in the airline industry worse, which is when the airline launched its international operations.
Some companies just fail to learn—either from the examples that its peers may have set for the industry, or from its own past mistakes. Now, Kingfisher has decided to change its model yet again—discontinuing its Kingfisher Red brand and completely converting its fleet to a dual class, full-service configuration.
Kingfisher was gifted to Mr . Sidhartha Mallya by his father on his birthday i.e. a Near Zero experience in running a company and the later CEOs appointed by Mr . Mallya couldn’t bring any significant result too . His over indulgence in petty things like parties and Kingfisher Calendar also lead to inadequacies in his finances. .IPL is also one of the reason for Kingfisher downfall because it is known that many of the money was diverted to IPL from Kingfisher airlines, resulting which they defaulted in Loans and recently became a NPA (non performing asset) to its leading bankers like SBI .
The lack of trust was shown recently when Mr Mallya asked the government of India to bail him out. The new minister Mr. Ajit Singh clearly told that the Government will not bail out private airline because Air India is itself in need to bail out. I personally feel that Mr Ajit singh made a good decision because When Kingfisher doesn’t give public anything in return of its profit , then why is it asking for Public hard earned money ( income tax money) to bail him out.
The lack of management and top of it the soaring petrol prices, the airport charges added to Kingfishers humiliation. Frequent cancellation of flights , nonpayment to employees, rude staff laid the ground for Kingfishers grave. Kingfisher reputation took a beating when it was known that employees tax were not submitted to government on time since the last three years! Government of India also freezed 40 Kingfisher’s bank account. Latest news is that Kingfisher employees have been not paid three months salary. We all know how we feel when our salary is delayed by a day, imagine what happens to them when they are not getting salary for last three months. How do you expect the employees to keep a smiling face to its customers when they themselves are crying . A company which forgots its employees, is also soon forgotten. A classic example is Kingfisher airlines. Mr Mallya had to sell 49% of his ownership of Force India( F1 car) to Mr Subrato Roy to get kingfisher going ( owner of ailing airline Air Sahara , years back) , but it too failed to save the airlines from tatters.
I still have hope from Mr Mallya that he will refrain from over indulgence and concentrate on his fragile business. It’s time he and his son become responsible and start this company from scratch instead of late night parties and IPL and took inspiration from Indigo airlines who proudly claimed themselves as Low cost airline and exceeding the customers delight in every way they can.
Subject: Kingfisher Airlines,
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 12 September 2016
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