"Rated among India's most respected companies by Business World."
"India's No. 1 Airline in customer satisfaction by Business World."
"Voted as India's Favorite Airline."A company that is known for its excellence in service, due to its poor strategies went onto get suspended by Civil Aviation department of India. Kingfisher Airlines is a popular airline service in India run by Vijay Mallya. Being successful in the breweries industry, Mallya entered the airline business in 2005. The company had a good run in the initial years, but failed in the subsequent years.
The Synergy Mirage - Acquisition of Air Deccan
In 2007, Kingfisher acquired Air Deccan, a company that was making good profits. The merger was estimated to save 3 Billion INR combined for both companies on costs. Air Deccan was targeting at lower middle class offering low-cost airline services. Kingfisher was focused on premium class. The result of the merger was a loss to Kingfisher due to operational inefficiencies such as flights of both the firms operating at same times.
Faulty Financial Engineering
The company was facing huge operational losses. However, it was raising funds of about 5 Billion INR. In addition to that, the company started expanding aggressively by operating new flights to Europe. All these events led to huge debts which eventually forced the management to lay off employees. The company had outstanding loans with 17 banks. It was not able to pay the airline fee to the airports and had tax debts. The employees went to protest as their salaries were not paid.
While the company was running in losses, operational expenses were continuously increasing. It was due to rise in fuel prices, fall in rupee value, high cost of landing fees and airline taxes and aggressive price cutting by competitors.
Recently, Mallya announced that funds will be pumped from his other firms into Kingfisher for its recovery. Talks with global firms for stake sale is also going on. Aviation is one of the riskiest businesses as the cost involved in it both capital and operational is very huge. With poor execution of strategies and frequent changes in the top executive management, will Kingfisher survive to deliver in the future?