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Authors: S Rajagopalan
Published by: Amity Research Centers
Published in: 2011

Abstract

Kingfisher Airlines was a private Indian airline operating in both the full cost service and the low-cost segments. Kingfisher, which commenced operations in 2005, was the aviation arm of the UB Group, whose business interests included alcoholic beverages, fertilizers, and engineering. Kingfisher attracted attention for its high quality product and service design. It was the first airline in the country to introduce first-class cabins on board. In 2007, Kingfisher moved into the low-cost space as well by taking a 26% stake in the pioneering low-cost carrier, Air Deccan. Later that year, the two airlines decided to merge in an attempt to save costs and realise operational and financial synergies. Air Deccan was renamed as Kingfisher Red in 2008. After six years of operations, however, Kingfisher was yet to record profits in a single financial year. The airline’s debt liability had ballooned to alarming proportions. By September 2011, the company had accumulated debt to the tune of INR 60 billion and losses of INR 50 billion. In an effort to stem the mounting losses and restructure its business model, Kingfisher decided to shut down its low-cost brand, Kingfisher Red. Most industry analysts were sceptical on the impact this move would have on Kingfisher’s prospects. The case study provides an overview of the Indian airline industry and discusses Kingfisher’s business model, its strategy behind acquiring a low-cost airline and then exiting the segment, and whether the strategy will pay off in improving its financial situation.
Location:
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2011

About

Abstract

Kingfisher Airlines was a private Indian airline operating in both the full cost service and the low-cost segments. Kingfisher, which commenced operations in 2005, was the aviation arm of the UB Group, whose business interests included alcoholic beverages, fertilizers, and engineering. Kingfisher attracted attention for its high quality product and service design. It was the first airline in the country to introduce first-class cabins on board. In 2007, Kingfisher moved into the low-cost space as well by taking a 26% stake in the pioneering low-cost carrier, Air Deccan. Later that year, the two airlines decided to merge in an attempt to save costs and realise operational and financial synergies. Air Deccan was renamed as Kingfisher Red in 2008. After six years of operations, however, Kingfisher was yet to record profits in a single financial year. The airline’s debt liability had ballooned to alarming proportions. By September 2011, the company had accumulated debt to the tune of INR 60 billion and losses of INR 50 billion. In an effort to stem the mounting losses and restructure its business model, Kingfisher decided to shut down its low-cost brand, Kingfisher Red. Most industry analysts were sceptical on the impact this move would have on Kingfisher’s prospects. The case study provides an overview of the Indian airline industry and discusses Kingfisher’s business model, its strategy behind acquiring a low-cost airline and then exiting the segment, and whether the strategy will pay off in improving its financial situation.

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Location:
Industry:
Other setting(s):
2011

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