Date post: | 15-Jul-2015 |
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Business |
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Story Begins…
one of India’s leading privatecarriers — went off on the nightof February 17 when wordspread like wildfire thatsomething was amiss atKingfisher’s Kolkata station.
Earlier that week, the incometax department had frozen theairline’s bank accounts for non-payment of tax deduction atsource (TDS).
By the evening of February 18, the problem had become serious enough for the airline to issue a statement. But it was too late.
But what led to the latest edition of the trouble that has
plagued Kingfisher?
Kingfisher has notched up a debt of over Rs7,000 crore. Just recently, the airline reported a loss of `444 crore
But how did things come to
such a pass for Kingfisher, thatalways had the image of apremium airline where thehospitality was king-size.
Expert views..• “Kingfisher got their strategy wrong. Kingfisher lost
out since it thought it could capture the market byoffering frills,” - A prominent aviation analyst told CNN on
condition of anonymity.
• “For Kingfisher, it was a mish-mash of businessmodels. Their’s was a flamboyance-based aviationmodel. Then they acquired a low-cost carrier likeAir Deccan but did not leverage it,” - A prominent
Analyst
Expert views..Contd..
• “There are deeper systemic flaws affecting all carriers which too are responsible.” - Mr. Jitender
Bhargava (Former executive director of national carrier, Air India)
• “The main problem is that global oil prices havebeen shooting up. The airlines do not increasefares proportionally due to intense competitionamong themselves. The result is more losses.” - Civil
Aviation Ministry
Kingfisher view..“The airline industry in India is going through a toughperiod due to high costs and lower yields. This isevident from the unprecedented losses recentlyreported. Kingfisher has not made any bailout requestto the Government. We have only asked our banks foran increase in limits due to significant increase inoperating costs caused by increase in fuel prices andrupee devaluation,” - the airline had stated last year.
But just who will the market forcesmake the biggest beneficiary ifKingfisher shuts shop??
Low-cost carrier IndiGo which ismaking profits is now viewed as themost successful airline with a soundbusiness model.
Now it's time to do whatmanagers usually do …;)
Analysis 1
Indigo• 31 destination in india• Focused & Profit Making
routes• Low price compared to
kingfisher red• Low Terminal cost like D1 in
new Delhi and 1B in Mumbai• Focus on Low Cost Airlines• Less Turn around time as
compared to Kingfisher red.
Kingfisher Red• 63 domestic destination in
india• Many Unprofitable routes
like Nasik, Hubli etc• Grounding of 14 aircraft• Operation shifted to New
Terminal in Delhi & Mumbai• Focus diverted from high
services to low cost• More Turn around time as
compared to Indigo
Destination Map
To get more details about route map, You can visitIndigo - http://book.goindigo.in/skylights/cgi-bin/skylights.cgi?module=C3&page=ROUTEMAP
Kingfisher - http://it.aviate-res.com/kingfisher-airlines/route-map.aspx
Analysis 2
IndigoStandardized Aircraft• Less Inventory Spares• Less Training Cost• Less Maintenance Cost• Less Operational Cost• Effective Terminal Use• Easy Scheduling
Kingfisher RedDiversified Aircraft with different capacities• High Inventory Spares• High Training Cost• High Maintenance Cost• High Operation Cost• Scheduling difficult• More Human Resources
required.
what is the roadforward for Kingfisheror is it pretty much theend of the road?
In a recent media interview, Dr Mallya had indicatedthat there were three investors ready to pick up stakein the airline but added that they were waiting forGovernment announcements on FDI to become policy.
The government is now set to approve a 49 percentFDI limit for foreign airlines in Indian carriers.
FDI / EQUITY
Expert View..
“A total and urgent overhaul is needed. Only infusionof more funds can ensure the revival. There has to bea sound and well-thought out business model as theairline cannot afford to go wrong again. Costs havealso to be scaled down. There are too many things tobe done.”Mr Bhargava
My View..
Route Rationalization: Cutting back unprofitablesectors and services to several cities
Debt recast: Asking bank to reduce rates or take a cuton loans or find a "local investor“
FDI: If the FDI limit is raised and foreign airlines areallowed to buy a stake. Mallya could recapitalizekingfisher.
The End
Can He Ride This Out?
Thank You !!