A project report on how kingfisher airlines went from being the largest domestic airline to being locked out in the cold. Marketing management, Marketing mix, marketing strategy, productivity and efficiency, current ratio, and it failures

1. Asia Pacific Institute of Management
12th Dec 2013
Rise and Fall of Kingfisher Airlines
A Project of Marketing Management 2
TV, Shreeharsha;Karmakar, Ankit; Pandey, Prabhakar; Shukla
Mritunjay; R, Nithin; Mishra, Devendra

2. Abstract
Kingfisher Airlines Ltd. is an Indian private airline group widely unpopular for its perennial loss ridden
balance sheet and the eventual financial meltdown. Kingfisher Airlines started operations in May 2005
and soon grew to become the largest passenger carrier in the country. Financial mismanagement, over
personal indulgence, lack of respect for the business and naïve ambition led to its sad demise. Kingfisher
may have failed due to bad financials but was there a marketing failure? Are promotion and USP enough
to sell air tickets? The project talks of how Kingfisher Airlines grew into the biggest player in Indian
domestic airlines and how naïve ambition, poor market research and lack of clarity nailed the metal bird
to the ground. This project proposes a few recommendations of alternatives from the marketing
perspective that can be explored if in case the Airline is revived into operation.
2

3. Table of Contents
1. Introduction
4
2. Coming Together
5
3. Marketing Mix
6
4. Strategy
8
5. Falling Apart and the Factors Responsible
9
6. Exploring Alternatives
11
Conclusion
12
Bibliography
13
Appendix
14
3

4. Introduction
Kingfisher Airlines was established in 2005 by the flamboyant liquor Baron Dr. Vijay Mallya. Vijay
Mallaya was quoted to say that he wanted to break the shackles of conservative socialism and wanted
to give the middle class a standard of living that is enjoyed in the west. Born to the illustrious Vittal
Mallya, Vijay Mallaya inherited the ownership of the UB group when he was barely 30. Mallya
consolidated the group’s businesses and streamlined them into a profit making enterprise.
Kingfisher Airlines was an attempt of Vijay Mallya to provide an experience of leisure and luxury to the
common man of India. Kingfisher Airlines started modestly and took off very soon to become a giant in
the Indian Airline Industry. The Airline went through many stages of both organic and inorganic growth.
Growing its assets and also piling its liabilities.
The Airline never reported profits in its balance sheets after its listing in the Indian stock markets. This
trend of loss making continued and saw the Airline touchdown. Mounting Debts, continues losses,
hostile competition and lack of government aid together made sure that the Airline stood grounded
forever.
4

5. 2. Coming Together
Birth of Kingfisher
Kingfisher Airlines Limited was setup in 2003 at a Registrar’s office with its registered office in the UB
City Bangalore. The cheering and the beautiful ladies in red were only to come in 2005. Kingfisher
Airlines started its operations on 9th May 2005 with a modest fleet of 4 Airbus A320-200s; the inaugural
flight being from Mumbai to Delhi. Kingfisher Airlines closed the year with an income of INR 13.5 Billion
but still suffered a loss of INR 3.4 Billion.
The Early Days
Brand Kingfisher was starting to come into piece. Models like Yana Gupta posed in Red which would
remain to be an icon for years to come. In December 2006, Kingfisher announced that it would provide
in flight entertainment. This was curtsey of a collaboration with the Z network’s Dish TV DTH service. By
this time Kingfisher Airlines had a fleet size of 34. This was also the time when Vijay Mallya and his
managers came up with the plan of acquiring Captain Gopinath’s low cost carrier called Deccan Airlines.
Large Strides
Since June 2007, things started looking up for Kingfisher Airlines. Kingfisher now possessed 41 Aircrafts
and a schedule of 255 flights. By the end of 2007 and all the deliberations and hesitations, Kingfisher
Airlines finally acquired Deccan Aviation on 19th Dec 2007. The income at the end of the year was
recorded at INR 15.4 Billion and accounted to a surprisingly small loss of INR 1.8 Billion.
With the onset of 2008, Kingfisher Airlines became the largest passenger airliner in India. With a fleet
size of 77 aircrafts operating 412 domestic flights everyday Kingfisher had become a giant in the Indian
Airline Industry. Kingfisher had now started offering 3 classes of travel: Kingfisher First – the premium
business class, Kingfisher Class – Premium economy, and Kingfisher Red – the low cost service.
Kingfisher Red was just a new name for Air Deccan.
2008 came to see another large step taken by Kingfisher Airlines. They started operating on
International routes. This was facilitated by the courtesy of the merger with Deccan Airlines which was
in the Airlines industry for over 5 years.
By the end the FY2009, Kingfisher had made its name as the Five Star Airline of India and had been the
only Airline to be rated as such. The revenue rose that year because of the combined revenue of
Kingfisher and Air Deccan. It reported an income of INR 55 Billion, but the losses also had grown to INR
16 Billion. Many believe Acquiring Air Deccan was the first big mistake or in other words the beginning
of the end for Kingfisher.
5

6. 3. Marketing Mix
Product
Core
Air Transport
Supplementary
Food on Board
Complementary Gifts
In Flight Entertainment
Augmented
Online Booking
Pick up and Drop Service
Meal Choices
Mobile Ticketing
T01
Price
Kingfisher Airlines provided all its additional services and still managed to price its tickets at a
competitive price and not too far away from the industry standards. Pricing was done based on the
class, date of travel, day of travel and frequent flyer program.
Place
Distribution channels, in this case are the ticketing channels were online ticketing, mobile ticketing, tour
operators and travel agencies across the country. Apart from these channels, Kighfisher Airlines has its
posh corporate offices across popular downtown locations in different cities of the country.
Promotion
Hoardings across popular places in big cities, Media and press releases, TV channel of NDTV Goodtimes,
Brand ambassadors and Kingfisher calendar were all used to promote KFA. Kingfisher also sponsored
sporting events and the line ‘Fly Kingfisher’ because symbolic of kingfisher ads.
KFA sported its ‘5 star’ facilities across ads, provided special offers and held the ‘king club’ program for
frequent flyers.
People
All employees sported the Red of Kingfisher. Ground staff, support staff, cock pit and flight crew were all
highly motivated and posses advanced analytical and technical skills. Some of them were sent abroad for
training and induction program.
The front line staff possessed ‘empathy’ while dealing with the clients. Kingfisher Airlines believed that
people was the most important P in their operations.
6

7. Process
Kingfisher was a heavily system oriented process. The process started with the booking channels,
confirmation, check in, boarding, baggage claim to cancellation and rescheduling of tickets.
Kingfisher followed a processed that allowed them to charge very little on cancellations and it provided
the clients with the option of rescheduling and editing the status of their reservation status.
In flight entertainment, reading, amenities and complimentary gifts were all intended to make the flight
as luxurious and comfortable as possible.
Physical Evidence
The aircraft itself was is a piece of physical evidence. The check in counters, run way ferries, in flight
equipments are all part of the physical evidence. The booking offices, airport lounges, aircraft amenities
and interiors all contribute to the physical evidence.
Seating arrangement selection facility while booking tickets through online portals is a reference to
physical evidence.
7

8. 4. Strategy
Kingfisher started off by introducing premium flying experience in domestic travel in India for the first
time. The events that occurred in Kingfisher’s journey are enlisted in the table below.
Existing Product
New Product
2. In Flight Entertainment
4. Increase Fleet and Destinations
6. International Operations
1. Premium Flyer
5. Three different Classes KF
Existing
Market
3. Deccan Airline Takeover
New
Market
T02
The table shows how Kingfisher zigzagged across the Ansoff Matrix in always trying to do something
bigger. The fall of Kingfisher is sometimes attributed to this attitude of always wanting to grow.
1. Premium Flyer – Kingfisher tried to start something new that was not famous or familiar in India.
2. In Flight Entertainment – KFA tried to improve the flying experience of its customers.
3. Deccan Airlines Takeover – Kingfisher tried to grow inorganically and made an attempt to enter low
cost flyer market.
4. Increase Fleet and Destinations – To improve its quality of service and grow its market share.
5. Three Classes of KFA – Since KFA found itself in the middle of 2 different business models, it planned
on operating different things differently and diversified itself.
6. International Operations – An attempt at product development, it wanted international operations by
its name. More than making a market for itself internationally this was about setting this up as a feather
in the cap.
8

9. 5. Falling Apart and the Factors Responsible
Naïve Ambition
The flamboyant confidence of Vijay Mallya led him into the airlines industry unarmed and unaware of
the risks and mitigation plans. Coming from a liquor business that had a turnover profit of 20-30% he
expected over night profits in a business where 3% profit was an accomplishment. This underestimation
will be a hard learnt lesson.
Continuous Losses and Mounting Debts
Kingfisher’s bad spree continued into the years following the merger with Deccan Airlines. Analysts
called the merger to be the first mistake of Mallya. The liabilities increased and so did the losses. The
idea of launching Kingfisher Red was a complete flop. The share holders of Kingfisher had started losing
their patience in Kingfisher, they had not receive a dime of dividends from the company.
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total Current
Assets (Cr
INR)
5.83
8.66
32.34
91.75
251.49
518.91
81.64
426.5
538.28
716.36
574.56
Total Current
Liabilities (Cr INR)
Current Ratio =
TCA/TCL
4.33
7.73
25.72
108.77
434.05
449.15
687.31
3814.63
3908.03
4483.46
6046.66
1.346
1.120
1.257
0.843
0.579
1.155
0.118
0.111
0.137
0.159
0.095
T03
It was in 2011, that Kingfisher first admitted they were having financial issues, soon it was realized that
the company had not been able to pay its dues to the oil companies. Kingfisher maintained that it was
because of the rise in the general prices of fuel and the company would stabilize once the oil prices
stabilized at a range.
The Jan of 2011 brought the bad news from SBI, the consortium leader had declared that Kingfisher had
become an NPA. Kingfisher owed SBI an amount of INR 14.5 Billion. What followed was a series of job
cuts and hunger strikes by its employees.
Authorities at different banks and investors said that Mallya and his managers would always have an air
of poised arrogance in them. They would look confident and confidently accept that they had no money
9

10. and we’re looking for investors. The big bosses had confidence in the passing of the FDI act and that
they would be able to rope in a few names from abroad.
Hostile Competition and Government’s role
Airline industry is no doubt a very competitive industry, but for Kingfisher Airlines, their counterparts
have been really intolerant and unyielding when it came to carrying Kingfisher flyers in case of
cancellations and reschedules of Kingfisher flights. It is also widely rumored that bosses of certain
airliners conspired to make Mallya unpopular among the Middle Eastern airliners.
When it came to the government, there was an untold protective attitude towards Air India and a step
motherly treatment towards the private players, more so in case of Kingfisher as it was backed by a
stern boss who wouldn’t consider anything above his reach. Mallya banked heavily on passing of FDI but
sadly for him the time taken by the cabinet to pass the FDI act was longer than the patience his investors
had.
Lockout and License Suspension
Entering 2012, the bookings dropped to near zero numbers and Kingfisher had a hard time even paying
off the insurance premiums for their aircrafts. By this time, Kingfisher Airlines employees including Pilots
and ground staff had not received salaries for over 6 months; they had resorted to calling in hunger
strikers and boycotts. Mallya and his managers would time and again hold meetings to promise and
convince the staff about their salaries being paid off soon, but little else did they receive.
By August 2012, Kingfisher Airlines had a dismal fleet size of 6 and a meager 25 destinations on its
schedule. It had seen such bad days that they couldn’t pay Airport Landing charges in the airports of
Delhi and Mumbai. October 2012 saw the official suspension of all Kingfisher Aircrafts. The operating
license of Kingfisher Airlines was finally revoked in Feb of 2013.
10

11. 6. Exploring Alternatives
Financial Bailouts
The SBI being the leader of the consortium of banks that lend funds to Kingfisher holds a major stake in
the Airline, by constructive meetings with SBI and other investors Kingfisher trusts, a deal could be
struck to pump fresh capital from new investors. Suicide investors and investors who buy sick units can
be prospected.
An alternative considered by Mallya is getting his other business establishments to take over some of
the debts from KFA. Analysts don’t really back this decision.
Collaborations
Vijay Mallya is a well connected man and Kingfisher is a very famous name in the world. Now that 100%
FDI is allowed in the Airlines Industry, it shouldn’t be such an uphill task to find investors who would like
to collaborate with KFA. Though collaborating with an ailing Airline means taking over debts, the brand
Kingfisher is big enough to make it worthwhile.
Reengineering
The mistake of envisioning something ahead of its time was what lead Kingfisher to its downfall.
Reengineering its marketing strategy to a market penetration strategy would help kingfisher make a
comeback. Playing by the same rules that every other player plays is what Kingfisher needs right now.
Segmentation and Targeting
The major failure occurred when KFA lost track of who they want to serve. It is an absolute necessity to
select the segment of the airline market they want to target and stop the juggling act.
11

12. Conclusion
Kingfisher Airlines was started with the just idea of providing a luxurious flying experience to the
growing middle class of India. In a country where air travel itself is considered a luxury, the idea of
providing luxury air travel was a little ahead of its time.
The initial losses were an indication of this, but the lack of patience and the urge to grow faster led to
Kingfisher’s advent into low cost flying, this was a mistake. Changing products and the target market
lead to more avenues to make loss.
Entering international routes without proper consolidation of domestic market was yet another
ambitious move that proved to bear losses. Mounting debts, lack of clarity and hostility from all corners
of the ring pushed Kingfisher to the brink and eventually ended in a lock out.
All is not lost, 100% FDI, government bailout plans and capital pumping from Mallya’s other businesses
can still prove to save Kingfisher Airlines. If revived, Kingfisher Airlines can sustain if it does not lose
focus on its core objective of providing luxury flying experience.
12

13. Bibliography
1. ‘Kingfisher Airlines – A Case Study’ By Chaahat Khattar, 2012.
2. Kingfisher Airlines BalanceSheet - Moneycontrol
3. ‘Rise and Fall of a Castle in the Air’ By K GiriPrakash, The Hindu, Feb 2012
4. ‘Kingfisher Airlines Case Study – Strategic Management’ By Gaurav Gupta, Feb 2013
5. ‘The real reasons behind Kingfisher’s fall’ Raghuvir Badrinath, Business Standard, June 2011.
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14. Appendix
Acronyms
INR – Indian National Rupee
KFA – Kingfisher Airlines
DTH – Direct To Home
NDTV – New Delhi Television
NPA – Non Performing Assets
SBI – State Bank of India
FDI – Foreign Direct Investment
Tables
T01 – Benefits of the Product(service) of Kingfisher – Pg 5
T02 – Ansoff Matrix showing Kingfisher’s developments – Pg 7
T03 – Current ration analysis showing Kingfisher’s Assent Liability ration – Pg 8
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