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NY Times Article: "Kingfisher's Troubles"  
User currently offlineSR 103 From United States of America, joined exactly 14 years ago today! , 1740 posts, RR: 39
Posted (5 years 3 months 1 week 3 days 11 hours ago) and read 4094 times:

Thought some of you may like to read an article regarding Kingfisher's troubles that was posted on the New York Times website. (I tried searching but could not find if this article was mentioned elsewhere on this site. Forgive me if it was.)

In Kingfisher's Troubles, a Cautionary Tale About India

Anyone think Kingfisher Airlines is going to dissapear or is this just the media looking at the "glass half empty?"

8 replies: All unread, jump to last
 
User currently offlineSq_ek_freak From United Kingdom, joined Dec 2000, 1635 posts, RR: 20
Reply 1, posted (5 years 3 months 1 week 3 days 8 hours ago) and read 3845 times:

Sad, sad article. It seemed that Kingfisher really had brought about some of the glamor of the old days with their classy operation, and I really had high hopes for them as a ultra luxurious niche operator. Hope they survive this downturn!

So the part in the article where it says that the two airlines (Jet and Kingfisher) made "expensive acquisitions last year" - I actually was aware that both airlines had made those acquisitions, but I had two questions regarding the motives behind the purchases:

1. For Kingfisher as a new airline, it was obvious that they wanted Deccan's rights to fly abroad due to the Indian government's ludicrous regulations about the 5 year rule. This would give Kingfisher the means to expand internationally with Mallya was eager to do. But why did Jet buy out Sahara? They were a loss making airline with a pretty poor reputation, and Jet had been around long enough not to need them for international rights. What was the purpose of buying Sahara and absorbing the toxic assets and reputation of Sahara?

2. Does Indian regulation not allow for full absorption of a company once it has been taken over? When Jet bought out Sahara, they renamed that wing of their operations as JetLite, and with Kingfisher they simply renamed it Deccan (or is it Deccan Red?). Either way, why couldn't they have just absorbed the old brand into the larger companies that were Jet and Kingfisher? To this day I don't know the difference between JetLite and Jet, though I do know they they make a distinction between the two. Do the Jet planes even carry a different logo? The Kingfisher Airbuses carry a huge Deccan decal, but still sport the Kingfisher tail livery - talk about brand erosion!



Keep Discovering
User currently offlineThomas_Jaeger From Switzerland, joined Apr 2002, 2390 posts, RR: 28
Reply 2, posted (5 years 3 months 1 week 3 days 7 hours ago) and read 3813 times:

What makes it even worse from a brand perspective for Jet Airways is that they have now launched their Jet Konnect product which is operated by Jet Airways but a no-frills service. So they have Jet Airways (mainline), Jet Konnect (mainline aircraft, no frills) and JetLite (ex-Air Sahara, LCC?), hello?  Smile


Swiss aviation news junkie living all over the place
User currently offlineRyanair!!! From Australia, joined Mar 2002, 4755 posts, RR: 26
Reply 3, posted (5 years 3 months 1 week 3 days 4 hours ago) and read 3567 times:

To be honest, Kingfisher just blows a lot of hot air and while I applaud their innovations in the service area, a little humility would not be out of place here. Jet Airways seems quietly parading themselves and have built a brand that exudes charm and style. Kingfisher's brash and carefree decadent stance is really not to my taste, although i am curious to fly them to see what is going on.


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User currently offlineGolfradio From Canada, joined Jun 2009, 774 posts, RR: 2
Reply 4, posted (5 years 3 months 1 week 3 days 3 hours ago) and read 3463 times:



Quoting Sq_ek_freak (Reply 1):
But why did Jet buy out Sahara?

The deal was announced way back in early 2006 but the negotiations had been going on for some months before that. 9W and IC were competing for the bragging rights of the biggest domestic carrier and were fighting tooth and nail for market share. Sahara was third after 9W but the merged entity would catapult 9W much above IC. Believe it or not market share was a huge obsession with the carriers.

Quoting Sq_ek_freak (Reply 1):
Does Indian regulation not allow for full absorption of a company once it has been taken over?

Indian rules do allow full absorption. In the case of Jet and Sahara, the cultures never really aligned. There was just too much bad blood between the pilots about seniority and the merger never really happen in spirit (They are still fighting in court). I guess Jet thought keeping it as a separate entity would not dilute it's core brand.

As far as Kingfisher, it is perceived as a high priced, luxury carrier and the Deccan brand was just too strong. I guess this helped them play both ends of the market.


User currently offlineEghansen From , joined Dec 1969, posts, RR:
Reply 5, posted (5 years 3 months 1 week 3 days 2 hours ago) and read 3332 times:



Quoting SR 103 (Thread starter):
Anyone think Kingfisher Airlines is going to dissapear or is this just the media looking at the "glass half empty?"

Without looking at an audited balance sheet and income statement, it is hard to know what situation Kingfisher is in. However, I will say that the NY Times does not have very good people writing its business articles and they often don't know what they are talking about.

Pledging assets in exchange for loan guarantees is nothing unusual. Many American carriers have done this also. Another tactic is the sale-leaseback.

Taking on debt is certainly also not unusual either. American carriers are legendary in their willingness to take on debt and several have filed for Chapter 11 because of this action.

Postponing delivery of new aircraft is something practically every airline in the world with orders seems to be doing now - if they are not canceling their deliveries outright.

Finding an investor is nothing unusual either. Frontier just did the same thing with Republic Airways.

Having your stock price fall 80% since 2007 is not good. Of course by comparison, United's stock price has fallen 93.7% since October 2007, so Kingfisher is in good company.

Undoubtedly, Kingfisher is doing poorly and will have to adapt. Whether they are doing any worse than United, American or US Airways would require better information.


User currently offlineSq_ek_freak From United Kingdom, joined Dec 2000, 1635 posts, RR: 20
Reply 6, posted (5 years 3 months 1 week 2 days 12 hours ago) and read 2910 times:

Golfradio, thanks for answering my questions! It simply astounds me that Jet bought Sahara for the market share to put IC "in its place" Well they're paying for it now...

Are there any regulations in place that would prevent VM from funneling funds from his other more profitable enterprises (the sin industry i.e. alcohol, tobacco are doing quite well right now and are more or less recession proof) into Kingfisher Airlines to prop up the airline and enable it to ride out the storm?



Keep Discovering
User currently offlineGolfradio From Canada, joined Jun 2009, 774 posts, RR: 2
Reply 7, posted (5 years 3 months 1 week 2 days 11 hours ago) and read 2769 times:



Quoting Sq_ek_freak (Reply 6):
Golfradio, thanks for answering my questions! It simply astounds me that Jet bought Sahara for the market share to put IC "in its place" Well they're paying for it now...

Are there any regulations in place that would prevent VM from funneling funds from his other more profitable enterprises

There was another reason for Jet acquiring Sahara and that was the landing slots, hangars and parking bays at BOM and DEL. Even today there is a big struggle between the new upstarts to find parking bays and getting landing slots during the morning and evening peak hours. IIRC, the deal was for $500 million which was the valuation for the rights, infrastructure and the aircraft. Sahara was in the hole for $120 million and this deal threw them a lifeline.

AFAIK, it is not going to be possible for the Mallya to funnel money from UB Holdings (which control his Liquor and Tobacco interests) into Kingfisher Airlines. Both are publicly traded and I am sure his board will have something to say about it.

The last guy who tried that was R. Raju who founded Satyam, the fourth biggest publicly listed IT consulting company in India. He tried to funnel money into his realty subsidiaries run by his sons and is now in prison.


User currently offlineAbrelosojos From Venezuela, joined May 2005, 5100 posts, RR: 55
Reply 8, posted (5 years 3 months 1 week 2 days 11 hours ago) and read 2710 times:



Quoting Ryanair!!! (Reply 3):
To be honest, Kingfisher just blows a lot of hot air and while I applaud their innovations in the service area, a little humility would not be out of place here.

= If you not flown them, I don't know what your data point is. I find their service to be exemplary ... even if it makes no economic sense. Lack of humility is the mantra for a lot of these show-biz type entrepreneurs ... Mallya, O'Leary, Branson, etc. If any airline needs to learn humility, it is SQ ... oh wait, they are suffering already.

Quoting Thomas_Jaeger (Reply 2):
What makes it even worse from a brand perspective for Jet Airways is that they have now launched their Jet Konnect product which is operated by Jet Airways but a no-frills service. So they have Jet Airways (mainline), Jet Konnect (mainline aircraft, no frills) and JetLite (ex-Air Sahara, LCC?), hello? Smile



Quoting Golfradio (Reply 4):
Indian rules do allow full absorption. In the case of Jet and Sahara, the cultures never really aligned. There was just too much bad blood between the pilots about seniority and the merger never really happen in spirit (They are still fighting in court). I guess Jet thought keeping it as a separate entity would not dilute it's core brand.

= Jet Konnect has been launched due to the issues with merging the AOC of 9W and S2; hence, they cannot intermingle aircraft, have separate ICAO/IATA designation, etc.

Quoting Eghansen (Reply 5):
Pledging assets in exchange for loan guarantees is nothing unusual. Many American carriers have done this also. Another tactic is the sale-leaseback.

Taking on debt is certainly also not unusual either. American carriers are legendary in their willingness to take on debt and several have filed for Chapter 11 because of this action.

Postponing delivery of new aircraft is something practically every airline in the world with orders seems to be doing now - if they are not canceling their deliveries outright.

= Great point.

Saludos,
A.



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