Kingfisher Airline – Crash Landing
United Breweries Group established KFA in 2003. It began its domestic operations on May 9th 2005, with a fleet of four new Airbus A320-200s. KFA, which, redefined air travel in India entered into breakthrough agreement with Indian Airlines making it the first public-private partnership in the aviation sector. Later, it joined hands with Dish TV to bring for the very first time in the Indian skies live TV entertainment and also formed an alliance with ‘Jet Airways’ to provide improved standards of service.In 2007, KFA decided to acquire low cost ‘‘Air Deccan’’ despite of clear mismatch between two brands. UB Holdings which closely held KFA, held about 50% stake in Deccan aviation. KFA thus got international flying rights through a reverse merger. Subsequently ‘‘Air Deccan’’ was rebranded and called ‘‘Kingfisher Red’’. The airline offered three classes of travel to passengers: ‘Kingfisher First’, ‘Kingfisher Class’ and ‘‘Kingfisher Red’’. KFA commenced its international operations by connecting Bengaluru with London on September 3rd 2008, when the airline industry was severely hit with sudden sprint in fuel prices and global slowdown. Kingfisher has been the first Indian carrier to become a member elect of the big airline alliances ‘Oneworld’ in 2010.
KFA faced a serious financial turbulence in 2010, due to mounting debt and a shortfall in expected revenue. KFA defaulted in payment of lease rentals, employee’s salary and other dues. The airline, which had not made profit since its inception, went through debt restructuring in November 2010, in the form of a bailout package from lenders. KFA completed restructuring of INR80 billion debt, as all 18 lenders agreed to cut interest rates and convert part of loans to equity. Banks owned 23.21% of the company equity and were reluctant to further expand their exposure................
The present case is appropriate for the course on Strategic Management and can be used to achieve the following objectives.
- • To understand the suitability of a business model for an airline company in India
- • To learn about the appropriateness of value proposition in Indian Airline Industry
- • To know the necessity of the profit proposition for an airline company
- • To comprehend and compare low cost airline and full service premium airline
- • To apprehend the relevance of people proposition for an airline company
- I. Was the Business Model of KFA Coherent, Consistent and Sustainable? Substantiate your opinion with relevant reasons.
- II. How would you evaluate the value proposition of KFA?
- III. What was wrong with the profit proposition of KFA?
- IV. ...................