‘Kingfisher’s Bleeding May Not Stop Now’

What has really gone wrong with Kingfisher Airlines?

The Kingfisher model is inherently flawed because it is not a full service but a ‘full service plus plus’. You cannot grow that segment beyond a point because only a limited number of people can afford that segment. Kingfisher looked only at the top of the pyramid to grow while the actual volume was at the bottom of the pyramid where there is a big market. So it only added to costs. His big mistake was to change Air Deccan to Kingfisher Red. He should have kept the brands distinct. He wanted to make Kingfisher Red sexier but it became neither low-cost nor full service. When he blurred the brand, (passengers are not stupid) they migrated.

Mallya’s management strategy has been criticised...

Mallya wasn’t comfortable with the low-cost carrier business. He concentrated on attracting passengers by giving freebies, an experiment that had failed in the West. He gave caviar and champagne to passengers and silver cutlery on international routes and indulged the domestic passengers with luxury. Passengers don’t look at the freebies but at the fares and Kingfisher was more expensive than Jet Airways. For a long time, he also did not have a CEO to look after the airline and looked after it himself. For Naresh Goyal (Jet Airways) and others, it was their sole business but Mallya had other businesses, pursuits and passions to look after...and the airline business needs 24-hour attention, which he could not give. He also did not raise equity when it was easily available as he was not ready to accept the conditions. Now he is ready to accept equity with any strings attached.

And the decision to take Kingfisher international?

Going international was a big mistake. He should have waited till the domestic airline turned profitable as large aircraft and network building sucks up a lot of cash. He also ordered all kinds of aircraft and deployed them at a frenetic pace, increasing costs and expanding capacity in a model that doesn’t allow for that kind of expansion.

So what should Kingfisher do now?

The bleeding may not stop now because Kingfisher’s economy passengers will continue to migrate to cheaper real low-cost carriers. The only way to compete is by cutting all wasteful expenditure. It is still not too late. It may be a good idea to make Kingfisher domestic an all- economy low-cost model and ruthlessly cut costs on all fronts. This model will enable expansion of the consumer base. Also, sale and leaseback of new aircraft as Indigo is doing will help.

Mallya is pushing for FDI in airlines...

Today you may not get great players coming in because of lack of transparency and controls. It is extremely difficult to do business in an environment where a lot of lobbies work.

What can the government do?

The first 50 years the government made policies for Air India, then for Jet Airways. And now it is trying to make one for Kingfisher. We need rules for all instead of individual airlines.