Kingfisher Airlines : Managing

Multiple Stakeholders
Kingfisher Airlines
Established in 2003
Owned by United Breweries
Started commercial operations in 2005
Acquired 50% stake in Air Deccan and renamed it to
Kingfisher Red low cost arm
In 2011, KA served 63 domestic destinations and 8
international destinations across Asia and Europe
Predominantly a full-service airline
Three classes of travel ( First, Class and Red) on
domestic routes and two classes of services( First
and Class) on international routes
Rapid Expansion and excellent service offerings to its
customers King Club benefits
Airline Industry Challenges
Government Regulations Need for Airlines to fly
on financially unattractive routes Losses
incurred
Cut-throat fares Price war started by Air India -
Repeated bailout by government
High Fuel prices
High Taxes National and State governments
levied high taxes on Aviation fuel
Costs of enhancing domestic airport infrastructure
passed on to the airlines
Major Challenges
Lack of coherent model of operations ( low cost/ full cariers) -
Disconnect between the major stakeholders
Cost of transitions between the various classes consumed more
capital
Predominantly a full-service airline.
Low cost airlines offer 30% cost advantage per seat over full services
airline thus posing a big disadvantage in operating costs with regards
to the competitors
Never made a profit since it started operations in 2005.
Suppliers of aircrafts, fuel and loan adopted a safe guarding strategy
against KAs needs
By Sept 2011, accumulated losses were 5960 crores and the
consortium of 13 banks refused to provide further financial support
Delay in Salary payments to its employees leading to low employee
morale and mass exodus of pilots
Protests against the bailout of KA by government
Service Tax department froze the bank account of Kingfisher for non-
payment of dues
Share price dropped from Rs.48 per share in Apr 2011 to Rs.20 per
share in Nov, 2011, poor cash flow, dangerous D/E ratio and high
interest expense to net sales ratio

Plan of Action
Promoters need to give personal guarantees in order to infuse
cash into the company.
Clear off all the dues of the Oil companies, Airport Authority of
India(AAI), aircraft suppliers
Define a clear cut strategy of turning around the organisation with
specific timelines and actions on the different areas. ( i.e making
organisation lean, cutting down luxury expenses, liquidating
assets, ensuring full capacity utilization, sync ticket prices with
competitors)
Assure the employees of the presence of enough fund to pay off
the salaries / pay off the pending salaries timely to gain their trust
and boost their confidence in KA
Focus on secondary cities with smaller airports which will charge
less fees thus easing the operational cost pressure and improving
the cash flow
Governments should interfere to release the locked bank
accounts for a specific duration to let the KA restructure itself and
redeem itself
Permit FDI in aviation Talks with foreign players such as Diageo
THANK YOU