Case Study: Kingfisher Airlines: Are the Good times Over?

CASE STUDY OF KINGFISHER

In today’s world everyone aspires to be successful and majority of the discussions are weaved around success stories of businesses and individuals. Here I would like to take an opportunity to swim against the current, and analyze and discuss a failure!

Failure! Wait, before you start judging me, let me clear one thing – I am a go getter and always believe in winning. But, what I have learnt from my experiences is that failure teaches you more than any success ever can.

Today, I will discuss classic case of mismanaged Kingfisher and its journey from zenith to nadir.

·       MISMANAGEMENT TURNED INTO SCANDAL

Management is the lock that can only open with the right key. Right from time management to relationship management every individual strives to strike a perfect balance. But, how business mismanagement can cause a great fall is what this article deals with. As far as kingfisher is concerned it was poorly managed and short sighted business model. For a smooth business management an experienced CEO is the pioneer. After making huge success initially kingfisher flaunted all over the world being only aviation flying every corner of the country. It was providing services to destinations which is less beneficial for the comapny. Also a sustainable business model was the major drawback. Frequent fluctuation from economy to premium and from premium to mixed displayed a handicapped business model.

A business is not stable on money but with firm leadership and efficient business model. Kingfisher had neither of them except pretty female models.

·       

      MISTAKE OF ACQUISITION AND EXPANSION

The world still has a big question mark as why kingfisher took acquisition of Deccan. Deccan airlines were already a non-profitable and bleeding aviation company. Later, another irrelevant decision of international expansion made a brand kingfisher a matter of ridicule. Deccan was renamed as Kingfisher Red which was neither a low service carrier nor a full service carrier whereas kingfisher was a full service carrier. With low profitability, low liquidity, low margin international expansion was like building palace on air! Instead with an efficient management they could keep the parent brand as full service carrier and kingfisher red as low service carrier. The former would conquer the international market and later would cover the economic market.

EXPANSION WITHOUT GROSS MARGIN IS COMMITING SUICIDE

Lack of Strategy

Kingfisher initially launched luxury business class and later shifted to Economy class. The services of the airlines were appreciated by the travelers as the hospitality and aircraft condition of the Airlines were above average. But soon, the airlines shifted to low-cost air traveling, frequent changes made travelers lose interest in the airlines. In addition to that, they didn't focus on highly profitable routes in domestic area.

Lack of delegation

Mr. Mallya was too involved in the business and unlike his other two major businesses - the spirits and beer segments which were running smoothly under the managing directors, this airline had no long term CEO or MD.

High Operational Cost

Operational costs in airline industry are far above the ground compared to other industries. Airline companies require licenses for the routes, investment in the aircraft maintenance, salaries employees (which are usually on high end), airport charges, and huge taxes to the government. Above all, the cost of fuel was excessive and as such Kingfisher found it difficult to recover the high fuel cost and was making losses. Amidst the cut throat competition between airlines companies all these high operational costs without good profit margin caused the Kingfisher to downfall.

Frequent Change in Business Model

Kingfisher was launched as an all-economy, single-class configuration aircraft in 2005. However, just after about a year of operations, the airline shifted its focus from luxury to economy by a merger with Air Deccan, which was a low cost airline. It is very simple to understand that frequent change in the business model is not good as it gives no time to adjust in the existing business model. The same happened with kingfisher as they had no time to stabilize in the market.

Undoubtedly UNITED BREWRIES was advancing in full swing. As far as aviation industry is concerned one need to invest more and most importantly think twice before investing! As the saying goes business of breweries is a business of fun but aviation is a business of caution. Both don’t work in same temperament.

Business world is all about upsurge and downfall. At a certain point you might see your cover story on Forbes magazine and the other day u may end up bankrupt! All you can do to make yourself as well as your business stay stronger and longer is to learn from these big business scandals. 

Learning from your own failures makes u human but learning from failures from your fraternity will not only humble you but will bring out the best in you! You will utilize your ability and minimize your drawbacks more efficiently. May it be business or life luck plays some part and your faith does miracles. This is the rule of universe that will keep you stable in every arena of your life,

When time is in your favor,

Keep yourself grounded

And

When time is against you,

Keep yourself patient.

In the mean while keep learning and upgrading yourself from your failures!