Kingfisher Airlines : A dream that never really flew

The inevitable has finally happened. With the DGCA cancelling the flying license of the beleaguered airline from Bangalore, it effectively puts the lid on a chapter which has led to the biggest aviation crisis in India ever [No, I am not forgetting the Air India debacle, but this one especially could have been saved unlike the story of the “maharaja”.]

This might sound cliched, but I only hold Vijay Mallya to be responsible for where his airline is, today. That said, we all know its not the last we are seeing of him, but certainly the last we will be seeing of his airline. Optimists can say that there will finally emerge a buyer for KFA and that we can see it flying again, but this time both the pessimist and the realist would have firmly put the lid on the future of the Fly Kingfisher brand. All those planes grounded in Mumbai shall remain so, for a considerable amount of time, from what it looks like. One might wonder how the airline reached rock bottom in a matter of 3 years. I have a few answers to it, not all ofcourse, but definitely a few teething questions which are always worth having a look at. The comparison of the business models of Kingfisher Airlines and IndiGO, which is supposedly the world’s fastest growing airline (true story! ) gives a very interesting perspective on the whole story.

Kingfisher Airlines : The debacle

Kingfisher started as a full service carrier in 2005, offering single class configuration on all flights. Not a year later they were back tinkering that model and going on the lines of airlines such as Emirates or Singapore Airlines, offering five star travel facilities for its users. Facilities included live in – flight entertainment, virtually the first time ever in the asian subcontinent for all flights. It was an instant hit with the business travellers’ segment who were already disappointed with the monopoly of Jet Airways and Sahara back then. Quite obviously that the airline suffered losses in its first year of operation due to its nascency.

Year 2006 saw Kingfisher getting into serious talks at the prospect of acquiring Air Deccan. Air Deccan, the premier low cost airline in the country at that time had started getting slippery and Capt Gopinath, in my opinion, was the most street smart man on earth to have thought of bailing out, seizing the opportunity at just the right moment. I say this because Air Deccan worked on a business model which was virtually opposing the KFA model. Gopinath’s Deccan was built around a single fleet,  no frills, cost minimized approach which made flying accessible for the first time to every economic class of people in the country. I remember how my grandmother’s sister flew for the first time in her life, thanks to Deccan.

And Mallya was serious about acquiring this airline, which any expert in aviation would have advised against. Anyway, he went with his gut feel and acquired the airline in 2007. The main idea surely was to gain more market power with the increased fleet strength of 70 odd jets in the sky. But that opened up three segments for Mallya: Kingfisher First (Business Class), Kingfisher Premium (Economy Class) and Kingfisher Red, the new low cost entrant from the residues of Air Deccan. 2008 and 2009 were by far, the best years for KFA despite the merger with Deccan. He had a lion’s share in the aviation market and Mallya quite rightly brandished that feeling of power in his hands. Awards and accolades did come in his way and all looked promising for a while.

Three different business models with none being sound had already had chaos written all over it. Mallya was the only one who denied anything of this sort. Year 2010 saw his fleet strength go down and the re-emergence of Jet airways at the top. What was also significant was this little airline called IndiGO. IndiGO had an outstanding passenger throughput exceeding 90% on all flights and had the best on – time flight record. Addition of international routes did not do much of a favour to KFA and it continued to rapidly decline market share wise. 2011 was the first year when they seriously started reporting cash flow issues and simply attributed that problem to the rising fuel costs. I agree, rising fuel costs was an issue, but certainly not the only one. Had it been the only one, other airlines should have suffered equally as well. Airlines like the Jet Airways and IndiGO had continued to flourish in comparison with KFA. And that was due to the age of the fleet. IndiGO, for example has an average fleet age of around 2.4 years, SpiceJet has around 3 and I am sure none of us want to even think of Air India. The older the fleet, the more the fuel, the more the cost. Simple logic.

And so, the pilots left, flights and payments got delayed and the way downhill was almost inevitable now for Kingfisher. Curtailment of schedules, ensuing strikes by employees over the non payment of compensations has brought the airline to a grinding halt.

Business Model Analysis -Kingfisher

  1. If there is one aspect at which we could pinpoint the demise of KFA to apart from Dr. Mallya, it would be the failure of the company to read the business models carefully before they went into acquisition. The KFA model was a blind adaptation of the internationally successful airline business models and lacked any localization to the region it was operating on. I mean, why would an airline acquire a low cost company which made money on flying to airports such as Rajahmundry, Gulbarga, Trichy Vijayawada & Coimbatore and then put those flights to compete with the regular Delhi – Mumbai, Bangalore – Delhi routes?  It was astounding, the confidence of KFA on the low cost brand that it blew away all the Air Deccan strategies and created a few themselves, which misfired.
  2. Another most common flaw that is easily pointed out is the fleet mix and the dream of buying jets at a nascent stage rather than leasing them. This was effectively the reason to shut down Paramount Airways, if we remember. And more than that, successful carriers which fly low cost have always adopted a single fleet composition. All the leading low cost carriers in the world like Southwest (B737), Easyjet and Ryanair (A319/320) have all gone in with this diktat and it works. Because, single fleet reduces the costs involved in training of personnel and also on the maintenance aspects. KFA was too young to take more than 5 different types of Airbus’ and work without incurring huge losses. A good deal of it would have been negated with a sound business model and marketing strategy, but KFA sadly had none of it.
  3. The lack of technical expertise on the airline affairs. It won’t be surprising knowing the nature of Dr. Mallya that KFA had only two CEO’s in total for all the airline departments and Mallya insisted on running the airline most of the time. This might sound very familiar to that when Air India is run by a politician, and assisted by bureaucrats instead of a group of aviation experts, as is the practice with other airlines. Mallya might be gifted in many ways, but surely not gifted enough to manage an airline since he lacks the formal training in doing so.

Business Model Analysis – IndiGO

  1. IndiGO had a business model which was clearly a no – nonsense one at it. Single class configuration, no frills, quick turnaorund times (25-30 minutes in Indian airports is like magic), They leased flights instead of buying them and vowed to add one flight every four to six weeks. Possessing a very quirky advertising and marketing campaign, IndiGO quickly got onto the top ranks by possessing a record for the biggest percentage of on time flight records. This can only be attributed to the rapid turnarounds observed, which is one of the signs of a sound business model.
  2. They had a CEO on board as early as 18 months before they commenced operations. Not just that, they did not believe in exploding to life with a big bang as Kingfisher did. They were rather skeptical of slipping down and thus took baby steps into the aviation industry in India. Acquiring jets was not their  forte and instead they decided to lease them in the beginning, for leasing was a far more cost effective solution.Working this way up to the top has ensured a very firm base from where IndiGO can command and exert exceptional control over its strategies and the overall aviation scenario in India. And this has precisely got it into the position of the leading airline in the country, the fastest growing airline in the world in the world and quite obviously, the only airline in India to register profits.
  3. The gawkiness in getting deals done the way they want deserves a special mention because they have managed to do just exactly that. With 220 orders for the A 320 family lined up [one of the biggest deals ever], they managed to strike one of the best deals in aviation history with Airbus, as part of their expansion programs started in 2010, four years since their inception into the flying business. Whereas Kingfisher managed to reduce its fleets by 4 years because they had bought all of it and were experiencing mounting losses already.

Thus, quite clearly the demise of Kingfisher had everything to do with a flawed business model and the inability of it to live upto the needs and wants of the growing and increasingly ever-so-complicating global airline sector.

Passenger Survey Questionnaire :: Master Thesis Research Study

Passenger Survey Questionnaire

Dear readers,

Please take 5 minutes of your time to answer this questionnaire which will be used as part of my Master’s degree research study conducted in the MIT Portugal Program. I request you to read the instructions given in the questionnaire so that it will make your experience in answering the questionnaire easier.

Please forward this to your friends and/ or colleagues so as to garner maximum coverage for the survey and aid me in giving better research output.

This is the link: http://www.surveymonkey.com/s/KB38YSV

Warm Regards,
Nikhil Menon

The last moments of a dying spring

For the many thousands of immigrants who crossed over from their home continents, the European dream is rapidly falling apart. This is year 2012 and in many ways, serving right for all that the lunar calendar had foreseen or for that horror show of a movie which came out by the same name. Stories of crumbling economies, spurts in unemployment, pink slips, relocation and the like hound the headlines and quite frankly, its depressing to hear these first thing in the morning. Today, I have a few characters to acquaint you with and also their lives which as always, have some stories to say (hopefully not long enough to make you yawn, but indicative of what is happening around this part of the world) .

I start with the two guys I meet in this Indian restaurant quite regularly – Prem and Rasheed. They work in the restaurant. Prem is quite new to Lisbon, three years since he came here while Rasheed has been around for 7. Prem is a funny guy, speaks broken Hindi (he is originally from Nepal), thinks he is a stud, speaks Portuguese quite decently as well as the job involves interacting with the customers on a regular basis. He is an electronics engineer who one day hopes to study further. One of my first questions to him is the cliched Indian mentality of asking – You say you are an engineer. How did you land up in the kitchen of an Indian restaurant? To which he said that he landed up in Lisbon in the end of 2008, hoping to find a suitable work profile in Europe. Portugal because, firstly it was cheaper with easier visa processing formalities and the electronics/ telecommunications had witnessed quite a boom in the mid 2000s, along with the rest of the world. He later realized that the timing of his arrival in Lisbon coincided with the start of the global  recession and the ensuing European crisis. Ended up in a restaurant and never got out of it. He is leaving for home on Tuesday for the first time since the end of 2009 (He says he used to earn twice as much in 2008, when comparing to his salary at the present moment) saving up a little over 700 euros after 3 years of work.

Rasheed worked 11 years around Europe and was finally able to bring his wife to stay along with him, 6 months back. His kids are still in Pokhara (his wife hails from Pokhara, Nepal). Unlike Prem, he hasn’t seen the doors of university although took a loan from his step father to get into Europe in the wake of making an easy buck or two. Not a bad thought although it is strictly  reminiscent of the immigrant issues countries like Greece and United Kingdom are protesting against. Back in 2001, there was no real pressure in stemming the exodus of people towards Europe or the United States and so he survived, As things got worse concluding in the global recession and the recent eurozone crisis, he saw his salary dip to a third of what it was in 2006. He could save up a bit to ensure he went home four times in the last 11 years.

The third person Irfanuddin, the Pakistani father of 3 from Karachi runs a small supermarket in the avenue where I stay, is contemplating on going back to his motherland. His eldest son enters college this year and he couldn’t afford to put him into a good university in Pakistan despite the boy being brilliant. Even after being in Lisbon for 9 straight years, he couldn’t afford to give the boy a sum of 2500 euros to ensure his admission and the poor guy was obviously distraught when I met him last weekend. Sometimes I feel bad that I am compelled from deep down to purchase a few things from him despite them being a few cents costlier than the others. These days he says, all that he earns by keeping the store open from 0900 to 0000 is 40 euros, most of which happens by the sale of tobacco.

Most of the Indian graduates studying in the United Kingdom or majority of the European Union and United States are force – returned home as a counter measure adopted by these countries to counter the immigrant mess. The criteria for getting a work visa and/or employment in the United Kingdom is bound by a cyclic criteria, which shall eventually shut out hopes for a non – EU/ UK citizen. The stories can go on and on – be it be the Indian guy with an immobile right hand who wanted to find work in Europe returning empty handed (because nobody in his right frame of mind would engage a guy with only one hand, any work when there are countless others walking without any job at hand) to this Latin american guy I know who decided to get married to a Portuguese to make himself legal in the country.

European societies are highly multi – cultural, so there is enough scope for a cross continental wedding to save your life, if you are up for it. And I do see a lot of couples around me who are open to this, one way or another. And I belong to a country where, forget being from the same state, the partner might have to pass through the caste filter to make things legal. Anyways, that is a debate for a different day although quite note worthy of the changing notions of union and also reflective of the times that we are in, today. Coming to think of it from the point of view of the nations involved, it makes perfect sense to react the way they have been responding to the hard times by having more stringent immigrant policies. Most nations revel in bringing populist measures, which is easily anti – immigrants because they want to give higher chances for their youth, in comparison with a foreigner. And that indeed happens to be the right way to go about it.  [This was not supposed to be a rant, just in case you missed that in the midst of all this.]

But what is sad is when talented professionals are given no choice but to become the Prems of tomorrow, having to do something in order to ensure there is sustenance. I can authoritatively say that almost 80% of the new recruits are not happy with their current job profiles, but nobody wants to throw it away because you are not sure, when can you land up on a more suitable profile for work. So, for the next 4-5 years, we might very well be witness to MBA’s working in the kitchens of McDonald’s to make a quick buck, of more and more people turning into academia as a means of surviving the rough seas (most academic positions ensure you get a stipend, deemed fit enough to survive), Africans and Latinos marrying Europeans and Americans and vice versa for getting the documents which make them legal  [not the most apt, but indicative enough to get the hang of what is meant] and more of these kind of questions by eager individuals trying to survive the grind. The optimist will always push the individual showing light 5 years ahead of him which shall or shall not be necessarily true, the pessimist will conclude the world will end on 21/12/2012 and the realist will concur that there sure was a spring, (which will explain the exodus) and that it doesn’t exist anymore.

PS: Reading into a lot of conspiracy theories lately, it gives me a feeling that our existence and these tough times right now are part of a major conspiracy theory boiling over.  Major major conspiracy theory!