Project

Topic –“Case On Kingfisher

Airlines”

Subject-Strategic Management(mgt-209)
Submission date-15TH APRIL2009

Submitted to:- Submitted By:-

Dr .Raj Kumar Ankush Saxena
Gulshan
Mahanvi Tyagi
Parul Sirohi
Prashant Sharma
Group-2, Sec-B,MBA 1ST YEAR

School Of Management
Gautam Buddha University
Greater Noida
KINGFISHER AIRLINES

Vijay Mallya is looking at reports of Q3 of 2008 , thinking that can there be

any way to at least break even in this critical time of economic slowdown.
Aviation industry is very sensitive industry triggered hard by the recession
across the world. Kingfisher reports Rs. 592.96 crore net loss (from exhibit-
1) for the quarter ended 31st December 2008. Indian aviation sector is
buckling under rising fuel prices & manpower costs and falling air traffic.

Sales stood at Rs 1,447 crore versus Rs 1,353 crore, in line with Jet
Airways, which also posted a net loss of Rs 214 crore for the quarter under
review because of poor load factors.

The company claimed that technically, the financial results for the third
quarter cannot be compared with the corresponding quarter because the
Vijay Mallya-led Kingfisher was not listed last year and this year’s result
include figures of erstwhile Air Deccan, which Kingfisher took over last
year.

“High fuel and other operating costs coupled with lower load factors
contributed to the losses at Kingfisher,” an industry observer said.

On the operational front, Kingfisher saw corporate traffic being hit during
the quarter because of the economic slowdown. Yields and front-end load
factor also suffered “The full impact of the price reduction in aviation
turbine fuel will lower the airlines’ operating costs,” the spokesperson
added.
CURRENT PROFILE

IATA ICAO Callsign

IT KFR KINGFISHER
Founded 2002
Hubs Bengaluru International Airport
( Primary Hub)
Chhatrapati Shivaji International
Airport
( Secondary Hub)
Indira Gandhi International
Airport
( Secondary Hub)
Focus cities Ahmedabad
Chennai
Hyderabad
Kolkata
Frequent flyer King Club
program
Fleet size 75 (+139 Orders, 25 Options)
Destinations 77 (Including routes
servedKingfisher Red)
Parent company UB Group
Company slogan Fly The Good Times
Headquarters Bangalore, India
Key people Dr. Vijay Mallya, CMD
Mr. Hitesh Patel, EVP
Mr. Rajesh Verma, EVP
Mr. A. Raghunathan, CFO
HISTORY
Kingfisher Airline is a private airline based in Bangalore, India. The airline
is owned by Vijay Mallya of United Beverages Group. Kingfisher Airlines
started its operations on May 9, 2005 with a fleet of 4 Airbus A320 aircrafts.
The destinations covered by Kingfisher Airlines are Bangalore, Mumbai,
Delhi, Goa, Chennai, Hyderabad, Ahmedabad, Cochin, Guwahati, Kolkata,
Pune, Agartala, Dibrugarh, Mangalore and Jaipur.

In a short span of time Kingfisher Airline has carved a niche for itself. The
airline offers several unique services to its customers. These include:
personal valet at the airport to assist in baggage handling and boarding,
exclusive lounges with private space, accompanied with refreshments and
music at the airport, audio and video on-demand, with extra-wide
personalised screens in the aircraft, sleeperette seats with extendable
footrests, and three-course gourmet cuisine.

CURRENT SCENARIO
Kingfisher Airlines currently operates with a brand new fleet of 8 Airbus
A320 aircraft, 3 Airbus A319-100 aircraft and 4 ATR-72 aircraft. It was the
first airline in India to operate with all new aircrafts. Kingfisher Airlines is
also the first Indian airline to order the

Airbus A380. It placed orders for 5 A380s, 5 A350-800 aircrafts and 5

Airbus A330-200 aircrafts in a deal valued at over $3 billion on June 15,
2005.

With the sign of trouble in aviation industry, Kingfisher airlines and Jet
airways (used to be competitors), formed alliance (October, 2008) to
significantly rationalize and reduce costs and provide improved standards
and a wider choice of air travels options to consumers with immediate effect

• Kingfisher airline has won global awards at the SKYTRAX World

Airline Awards ceremony held recently in Hamburg , Germany(2009).
• Air France –KLM is in talks with Jet Airways and Kingfisher Airline
for having a code-share agreement .The conclusion of this agreement
 could help passengers , especially from smaller cities ,to travel further
on the network of these global airline.
• Kingfisher Airlines has launched “Five Star Privileges” ,an exclusive
program that entitles guests to avail of great deals at partner
establishment around the country.
• Kingfisher Airlines captures market share with strong passengers in
February 2009 as per the latest ministry of Civil Aviation data.
• Kingfisher Airlines has deferred deliveries of some Airbuses
(EAD,PA) aircraft, wary of overcapacity as airlines struggles to cut
costs to offset high fuel prices and softer demand.
The Airline , a unit of alcoholic drinks maker UB Group , has
negotiated with Airbus to defer deliveries of 32 A320-family aircraft
to 2010-2012 from2008/09, Kingfisher, which owns discount carrier
Deccan Aviation DECA.BO, has five A380 super jumbos on order ,
scheduled for delivery from 2012 , as well as 20 A350 Aircraft
scheduled for delivery from 2013.
It also has a further 20 A330/200 aircraft on order , making it one of
the single largest stakeholders in the Airbus order backlog by
number of planes.
• Indigo ,paramount Mull joining Jet Airways (India) limited and
Kingfisher Airlines Ltd ties up
• Kingfisher Airlines Ltd plans to sell 25% stake to allow foreign
airlines to invest in domestic carriers, with a cap of just below 26%.
• Kingfisher Airlines Ltd in talks to lease out two of its Airbus A330
planes to Nigeria’s Ank Air.
• Recently, it has announced management change .
• Air India has rejected the Jet Airways(India) Limited-Kingfisher
Airlines Ltd offer to join their Alliance.
• Deccan aviation Ltd has changed its name to Kingfisher Airlines Ltd.
• Private air carrier Kingfisher Airlines has inked an agreement with
Citibank Cards which allows members of its 'King Club' holding the
bank's cards redeem their points for flights on Kingfisher Airlines or
its partner airlines.
King Club is the airline's frequent-flyer programme.
"The association will benefit members of King Club, the frequent-
flyer programme of Kingfisher Airlines and Citibank cardholders who
are King Club members
 SWOT ANALYSIS

KINGFISHER’S STRENGTHS

 Superior product on ground; in the air Jet business class is being equated
with Kingfisher’s economy
 UB group backing for raising financing
 Well capitalised airline, prepared to take losses
 Better handling of employees and staff; less centralised style of
functioning
 Chairman Mallya’s grand vision where it is looking to be among the best in
the world
 The Deccan deal — which gives it market share, a new market segment
and was cheap

KINGFISHER’S WEAKNESSES
 Kingfisher is yet to build itself into an organisation; structures yet to fall in
place
 Not as professionally run as Jet; yet to build a professionally competent
team
 Mallya’s knowledge of the sector does not parallel Goyal’s
 Chairman’s people skills are better but employees have to work very
erratic hours
 Unable to leverage connections to the same extent while lobbying
 Kingfisher’s loads are lower than Jet’s, which could be a reflection of its
marketing and sales ability

OPPORTUNITIES

 Under penetrated domestic market

 International market
 Untapped air cargo market
 Expanding tourism industry
 Fleet size expansion

THREATS
 Existing Operators
 Infrastructure issue
  Fuel price hike

Comparision Between Airlines

Kingfisher Airlines Indian Airlines Jet Airways

Check-in Counter:

1 2 3 - -
1 2 3 4 - 1 2 3 4 -

Flight Attendants:

1 2 3 4 - 1 2 3 - - 1 2 3 4 -

Seating Space:
1 2 3 - -
1 2 3 - -
1 2 3 4 -

Punctuality:

1 2 3 4 - 1 2 - - - 1 2 3 - -

PEST ANALYSIS

Political Factors
• Ecological/Environmental Issues
• Current Legislation
• Future Legislation
• Regulatory Bodies And Processes
• Government Policies
• Government Term And Change
• Trading Policies
• International Pressure Groups Economic
• Home Economy Situation
• Overseas Economies And Trends
• General Taxation Issues
• Seasonality/Weather Issues
Interest And Exchange Rates

Social Factors

• Lifestyle Trends
• Demographics
• Consumer Attitudes And Opinions
• Media Views
• Law Changes Affecting Social Factors
• Brand, Company, Technology Image
• Major Events And Influences
• Sound Pollution
• Plane hijacking
• 9/11 Incident

Technological Factors
• manufacturing maturity and capacity
• information and communications
• technology legislation
• innovation potential
• technology access, licensing, patents
• intellectual property issues
• modernization of aircrafts
• modern tehnology like cat3 and ils

Economical Factors
• Economic meltdown
• Overall growth of the company
• Operating cost
• Capital
• Airlines acquisition/leasing cost
• Rising income level
• Reduced fare but yet not enough
STATUS OF KINGFISHER AIRLINES (passanger based)

On the basis of market share

Market
share
Airlines %
Kingfisher 28
Jet airways+Jet
Lite 25
Air India 17
Indigo 13
Spice Jet 12
Go Air 2.5
 Paramount 1.8

MERGERS AND ACQISITIONS

Dec. 2007Low-cost carrier Deccan and Vijay Mallya-led Kingfisher Airlines
decided to merge and create a single corporate entity to cut down operational
costs and accelerate their journey to profitability. Shares of Deccan Aviation
have doubled in a little over a month in anticipation of a reverse merger of
Kingfisher Airlines into Deccan Aviation. Details of Deccan-Kingfisher merger,
valuations and swap ratio will be worked out by accountancy firm KPMG.

Mallya would be the chairman and CEO of the merged entity, while executive
chairman of Deccan, Captain G R Gopinath would be the vice-chairman.

STRATEGIC PARTNERS
1. Kingfisher Airlines Inks Strategic Alliance with American Express. Partners

launch India’s first Airline Corporate Charge Card Program Fast track
Corporate Savings with exclusive Rebates, Discounts, and Employee
Rewards with King Club and Bonus Points.

2. Strategic and operational alliance with rival domestic carrier Jet Airways
owned by Naresh Goel in 2009.
Current strategy of Kingfisher Airlines
Following strategies were followed to make it one of the leading Airlines in India.

Functional strategies

 It planned to re-launch its commercial air service called UB Airway again which it

had to withdraw it due to government restrictions.

 The company gave best services to its customers that were like providing world class

interiors, and in-flight entertainment systems.

 The company came up with only one class airlines rather than other airlines that had

Business Class; Economy Class the idea was to combine Business Class experiences

and Economy Class experiences in one.

 Having a single class freed up more leg space for passengers when compared to
normal economy class flights.

 The company started addressing its customers as “GUEST” rather than passengers.

 The company made its mark by providing its guests with more legroom and bigger

seats so as to provide better comfort.

 KFA has set its sight to become India’s largest airline both is capacity and in market
share.

KFA’s Promotional Strategies & Marketing Strategies

 It came up with a very appealing promotional line “Fly the good times” and it

reflected in the experience the company offered to its passengers.

 KFA is also launched Kingfisher express in order to tap into the growing LCC
segment.

 Also launched the facility of web check-in, allowing travelers to print their boarding
passes via www.flykingfisher.com and the introduction of the Roving Agent at the
 airport. The Roving Agent is like a check-in counter on the move. You no longer need
to go to the check-in counter and wait for long.

As part of its promotional strategy the marketing team of KFA showcased the airline as
“the new flying experience”. The following initiatives were taken as part of its
promotional strategy…

Advertisements hoardings at airports depicted the stylish interiors of the “Fun

liners”, which conveyed youthful, fun-filled, and world class image.

 INOX multiplexes in Mumbai publicized KFA’s special offers for a month.

 KFA was the official travel airlines for the cast and crew of “Mangal Pandey”- the

movie.

 KFA made use of various fashion shows, celebrity golf matches, New Year parties all

to build its “Kingfisher” brand.

 The UB groups’ monthly magazine called “Pegasus” published information about

KFA along with other information related to UB group.

 KFA launched many attractive offers to promote its sales like the “King Card” in

association with ICICI Bank, in August 2005. This was meant to create loyal

customers for KFA by providing benefits like privileged access to lounges,

restaurants, free refreshments at airports, access to 180 golf clubs across India, special

invites for lifestyle shows.

 In October, KFA launched “Chill Times Offer” in the month of August 2005 and

September 2005.

 In October they launched the “King Saver Offer” which said “Fly like a King, don’t

play like one”.

 KFA targeted the frequent fliers business traveler segment, which was dominated by

Jet Airways. By offering a “King Saver Booklet”, This booklet contained six free

flight tickets and was presented as a free gift if the passenger bought two such
 booklets each worth Rs. 26,999.Passengers could avail off this offer if they showed

there Jet Privilege Member (Gold or Platinum) card.

Financial strategies:
KFA came up with many new financial strategic moves that made it one of the leaders of
aviation industry the company had adopted following strategies:

 The company is planning to spend close to Rs 40 crore on various media and

below-the-line marketing activities for the year 2009-10

 Cut down the salaries of the staff like trainee pilot now drawing Rs20k as
compare to Rs2.0lacs.

 To come over the financial crisis the KFL is considering an option of

retrenchment.

 It purchased brand new A320 aircrafts powered by the cockpit that was a

paperless environment.

 KFA was first Indian carrier to place an order for A380s.

Expansion strategy

To further its expansion plan KFA put in its bid to buy Sahara in November 2005.How
ever negotiation came to a standstill when KFA felt the valuation of Sahara Airlines of
around US$750mn to US$1 bn. was too high.

KFA has plans to make an Initial Public Offer (IPO) and raise around US$200 mn that
would be used for its fleet acquisition and route expansion activities.

KFA set up Kingfisher International Inc. (KII), a subsidiary in US for its international
operations. KFA plans to operate international routs by end of 2007. But KFA had yet to
receive permission from the Indian government.

According to Indian government domestic air carriers are not allowed to fly international
routes without five year of domestic flying experience. But Mr. Mallya said if he failed to
convince the government to change its rules, it would start an airline in a foreign country
and fly it to India.

Human Resource Strategies

Prior to launch, KFA signed a “non-poaching alliance” with Air Deccan under which both
the airlines agreed not to hire each other’s employee. KFA’s flight attendants called
“Flying models” were selected through a national level model contest.

KFA also stressed the fact that its employees had to be capable enough to meet the
airlines’ high service standards.

Mr. Mallya said “Kingfisher Airlines Limited has a first class management team not just
at top most level but also in the second line. This is part of the UB group’s commitment
to human resources”.

Recommended Strategies
 Should tie up with different state tourism (like Goa, Kerala, Tamil Nadu etc) to
promote domestic air traffic.

 Running online contests to boost traffic

 Looking at partnering with premium hotels, so that the customers of hotels

directly choose Kingfisher airlines for traveling.

 To minimize the air fuel cost and other operating expenses of aircraft they should
purchase new more fuel efficient and advance technology based aircraft.

 Code sharing with other airlines.

 Rescheduling of flights so that they can adjust the load.

 More tie ups are required like they can also be a part of STAR alliance.

 At the time of recession making collusions and cartels could be a good idea.

 In such a scenario it is imperative for any airline to build its brand and have a
focused marketing strategy and created a new category of Aviation hospitality
thus making service and hospitality as main focus.

 The company should join hands with certain banks like ICICI, SBI etc. to offer e-
ticketing.
Exhibit:-1

Income statement of KFA

Quarterly results in
brief (Rs crore)
Dec ' 08 Sep ' 08 Jun ' 08 Mar ' 08
Sales 1,447.83 1,322.64 1,397.66 557.61

Operating profit -408.25 -587.27 -54.29 -208.75

Interest 188.99 135.88 110.14 27.97
Gross profit -592.96 -688.06 -157.45 -186.67
EPS (Rs) -15.55 -18.17 -11.62 -14.7

Dec ' 08 Sep ' 08 Jun ' 08 Mar ' 08

Other income 4.28 35.09 6.98 50.05

Power and fuel - - - 319.88

Employee expenses 193.38 218.61 207.57 87.5

Admin and selling

expenses - - - 38.99

Other expenses 1,662.70 1,691.30 1,244.38 319.99

Depreciation 33.29 32.91 32.02 11.57

Taxation -212.85 -237.72 -31.6 1.41

Net profit / loss -413.39 -483.25 -157.87 -199.65

Equity capital 265.91 265.91 135.87 135.8

Agg.of non-prom.
shares (Lacs) 896.9 896.91 682.96 -

Agg.of non
promotoholding (%) 33.73 33.73 50.27 -
OPM (%) -28.2 -44.4 -3.88 -37.44
GPM (%) -40.83 -50.68 -11.21 -30.72
NPM (%) -28.47 -35.59 -11.24 -32.86