BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Posted (1 year 1 month 1 week 6 days 1 hour ago) and read 8853 times:
An alternate viewpoint floated in today's Business Standard newspaper, one of the most, if not the most, respected papers in India. Hopefully this will generate some interesting discussions amongst the learned forum members here on A.net.
Is Kingfisher Airlines really in trouble? It may just be a well-crafted strategy by Vijay Mallya to sail through the current crisis
Rumi Datta Hardasmalani / Mumbai Apr 13, 2012, 00:57 IST
Quote: While everyone seems to be in a mood to write him off with headlines about his airline on the verge of collapse, Vijay Mallya may well be right on track in executing his plans to get back a leading position in the aviation space.
Mallya may already have a foreign airline partner by his side, perhaps a cash-rich one, something that he has already hinted at in the recent past. All he has to do is clear the regulatory hurdles for the entry of his new airline partner in India. This is what may help the airline survive the current crisis. .......................
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 1, posted (1 year 1 month 1 week 6 days 1 hour ago) and read 8808 times:
Thanks for the link Devesh, this is really interesting.
While it made an interesting read, I don't really agree. Simply because I think that even with FDI, lease returns, cost cutting, etc., I don't think that Kingfisher will be able to ever make a comeback.
Unless their flawed business strategy and mismanagement which got them to this point is fixed somehow, they are just going to stay on the verge of bankruptcy. More investment will just prolong their lifespan by a bit.
Airports 2012: IXE HYD DEL BLR BOM CCU KNU KTM BKK SIN ICN LAX BUR SFO PHX IAH ORD EWR PHL PVD BOS FRA MUC IST
BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Reply 2, posted (1 year 1 month 1 week 6 days ago) and read 8616 times:
You're welcome Rohit. As I said, it is an interesting read and appears credible. The wheels within wheels within wheels at the intersection of big business, finance, politics and policy is truly mind-blowing. May be you will allow me to do some mentoring on the inner workings of big business and politics, with you, as I had to with Vinay.
I would not be in such a rush to discount Kingfisher. At its nadir Satyam was only Rs. 6 and TechMahindra bought it. Today it is Rs. 100 per share, and I can assure you the government had a hand in making all the right public noises, tweaking the policy, nudging the banks and the re-assuring foreign companies. Deals and projects of this size are like icebergs. 90% is below the the surface.
The insiders will confirm to you, many airlines are a front for political money. The investor is not the real source of the cash, who cannot expose themselves for obvious reasons.
Other than China, no other market has the potential that India does, and the first entrant advantage is huge. Why else are both Jet and IndiGo fighting FDI tooth and nail. A financially fit competitor will murder them.
A foreign investor with an airline as a strategic partner is more likely than a foreign airline.
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 3, posted (1 year 1 month 1 week 6 days ago) and read 8577 times:
Quoting BLRAviation (Reply 2): May be you will allow me to do some mentoring on the inner workings of big business and politics, with you, as I had to with Vinay.
Always appreciated
Quoting BLRAviation (Reply 2):
I would not be in such a rush to discount Kingfisher. At its nadir Satyam was only Rs. 6 and TechMahindra bought it. Today it is Rs. 100 per share, and I can assure you the government had a hand in making all the right public noises, tweaking the policy, nudging the banks and the re-assuring foreign companies. Deals and projects of this size are like icebergs. 90% is below the the surface.
Indeed. But the point is that after TechMahindra bought it, they also completely reformed Satyam. Investors could dump as much money as they want into Kingfisher, but until the (lack of a coherent) business model and (mis)management problems are fixed, Kingfisher is just going to keep on sinking.
Quoting BLRAviation (Reply 2):
The insiders will confirm to you, many airlines are a front for political money. The investor is not the real source of the cash, who cannot expose themselves for obvious reasons.
Seems like pretty much every big business is a front for political money these days - that's the only place where real money for investment can come from. It's not specific to the airline business.
Quoting BLRAviation (Reply 2):
Other than China, no other market has the potential that India does, and the first entrant advantage is huge. Why else are both Jet and IndiGo fighting FDI tooth and nail. A financially fit competitor will murder them.
As I said earlier, FDI ≠ financially fit. Serious reform is required to turn Kingfisher around.
[Edited 2012-04-13 00:43:54]
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parapente From United Kingdom, joined Mar 2006, 1316 posts, RR: 10 Reply 4, posted (1 year 1 month 1 week 5 days 22 hours ago) and read 8311 times:
This is a most interesting thread.Not being close to the centre of this story I would not be wise to comment but to listen.It was odd byt just before reading this thread I was reading the headlines in "Flight" which went.
Government approves Rs300bn Air India bailout.
So now I am really confused! Yust what is going on in India? Indeed it seems that Air India has been really badly managed,recently adfmitting that they had entirely the wrong mix of business to economy ratios and an incorrect overhead structure to match. From abouve comments it appears that Kingfisher too has been badly managed.But I do not know in what way- did they too get the wrong balance of j/y class pax? Or is it something more fundamental than that.
Then I read that Aviation fuel in India is three times the price of other countries. Can this be true - if it is I cannot imagine anyone making a profit!
VJ seems to me to be in between a rock and a hard placde right now, his distillery group is effecively up for sale but he is getting no takers.I have no doubt that there are people interested in all aspects of his " empire". But at the right price-they can wait - but can he?
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 5, posted (1 year 1 month 1 week 5 days 22 hours ago) and read 8277 times:
Quoting parapente (Reply 4): Just what is going on in India? Indeed it seems that Air India has been really badly managed,recently admitting that they had entirely the wrong mix of business to economy ratios and an incorrect overhead structure to match.
Air India's problems are a lot more than business to economy ratios.
Quoting parapente (Reply 4): From abouve comments it appears that Kingfisher too has been badly managed.
Yes. Kingfisher's problems stem from the fact that they merged with Air Deccan, which caused them to inherit a ton of debt, create a failure of a LCC instead of focusing on their high-end business, among other problems.
Quoting parapente (Reply 4):
Then I read that Aviation fuel in India is three times the price of other countries.
Aviation fuel taxes are three times higher in India than in other countries. Fuel costs are only about 1.5 times as much as in other countries, which is still a lot.
Quoting parapente (Reply 4): his distillery group is effecively up for sale but he is getting no takers.
UB has plenty of takers - Heineken is very interested in growing their stake in the company.
His airline on the other hand has no takers for obvious reasons.
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RWA380 From United States of America, joined Feb 2005, 2167 posts, RR: 4 Reply 6, posted (1 year 1 month 1 week 5 days 22 hours ago) and read 8227 times:
Some Indian aviation specialist being interviewed on BBC America stated Kingfisher would likely not make it, He stated that in his opinion most Indians do not have any loyalty to brand carriers, and that Indigo was part of the massive problems that Kingfisher will have to over come in order to survive.
Next Flights: AS PDX-SEA-KOA on DH4/738 in F, HA KOA-OGG on 717 in Y, AS OGG-PDX on 738 in F
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 7, posted (1 year 1 month 1 week 5 days 22 hours ago) and read 8185 times:
Some aviation specialist
Quoting RWA380 (Reply 6): Some Indian aviation specialist being interviewed on BBC America stated Kingfisher would likely not make it,
Yes, I think most people who know the situation agree that if nothing changes, Kingfisher won't make it. If Kingfisher gets bought out, they might make it. FDI without reform will not hel.
Quoting RWA380 (Reply 6): He stated that in his opinion most Indians do not have any loyalty to brand carriers,
Not true.
Quoting RWA380 (Reply 6): and that Indigo was part of the massive problems that Kingfisher will have to over come in order to survive.
If Kingfisher had stuck to their business model of catering to premium traffic, they never would have had to compete directly with Indigo anyway.
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BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Reply 8, posted (1 year 1 month 1 week 5 days 19 hours ago) and read 7879 times:
Quoting RWA380 (Reply 6):
Some Indian aviation specialist being interviewed on BBC America stated Kingfisher would likely not make it,
There are believers on both sides of the aisle. While Vijay Mallya has definitely lost some of his sheen, the Kingfisher brand is still very strong. commanding loyalty and respect. Who ever bails out Kingfisher, will retain the brand but remove Dr. Mallya and his ilk from the airline. Don't be surprised if there is a "gag" agreement requiring VJM to keep his mouth shut.
Quoting RWA380 (Reply 6): He stated that in his opinion most Indians do not have any loyalty to brand carriers, and that Indigo was part of the massive problems that Kingfisher will have to over come in order to survive.
Very true. There is a significant gap between the frequent fliers who are loyal to a FFP program, and then most passengers are there on the lowest fare-appropriate departure time matrix.
IndiGo, I am not sure of the carrier. Yes they have stood by their business model and it has yielded them results, but I do not think the results are purely due to their business model. Their over-aggressive fleet expansion could be due to the funding the airline is realising by their aircraft sale and lease back arrangements, but then sooner or later the premiums will catch up.
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 9, posted (1 year 1 month 1 week 5 days 19 hours ago) and read 7845 times:
Quoting BLRAviation (Reply 8):
Very true. There is a significant gap between the frequent fliers who are loyal to a FFP program, and then most passengers are there on the lowest fare-appropriate departure time matrix.
I definitely agree, there are lots of people who just are looking for lowest fare. However, that has never been the type of traveler that Kingfisher has been targeting. If they had stuck with their full service, high yield business, they would never be directly competing with IndiGo anyway.
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Stitch From United States of America, joined Jul 2005, 26728 posts, RR: 83 Reply 10, posted (1 year 1 month 1 week 5 days 17 hours ago) and read 7602 times:
With the Government seeming determined to keep AI alive and having approved their long-haul fleet expansion by agreeing to take their 787s, IT's tiny fleet at the moment doesn't strike me as something that can compete on long-haul and short-haul.
On short-haul, IT's fleet is about 1/10th the size of AI's - 7 A320 family frames compared to AI's 62. For long-haul, they only have one A330-200 left from their "Airbus Sampler Plate" order and I am strongly of the opinion that they will never take delivery of their A380-800 in the next decade. They do have their five A350-800s on the books, but they won't get them before 2016 at the earliest, at which point AI could have their entire 787 fleet in place.
As to getting additional frames, I am of the understanding that most of IT's fleet was leased and that the big reduction in the fleet size was due to lessors repossessing their planes. If IT was to seek new leases, would lessors want more financial guarantees or demand higher rents in order to protect themselves?
hohd From United States of America, joined May 2008, 266 posts, RR: 0 Reply 11, posted (1 year 1 month 1 week 5 days 16 hours ago) and read 7358 times:
The reason that Indians do not have any loyalty is most of the frequent flyer programs are a joke and many are not even aware of it. I had a cousin who lately started flying all the time and I had to remind to try to stick to one airline which has a frequent flyer program. However the program he chose, Jet has atrocious accruals and has one of the worst redemption programs in the industry. After seeing the initial results, he has now gone back to whatever his corporate travel agency books for him.
AI has a better name and actually has more frequent flyers since many govt employees are required to travel on it, but for some reason, due to constant instability, has been unable to attract the level of following it deserves.
airsmiles From United Kingdom, joined Sep 2009, 76 posts, RR: 0 Reply 12, posted (1 year 1 month 1 week 5 days 15 hours ago) and read 6923 times:
Has Kingfisher now stopped operating into London Heathrow? I checked some schedules for various dates on Kingfisher's website and Heathrow's website and I can't see anything coming up? Is this a sign of further trouble?
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 13, posted (1 year 1 month 1 week 5 days 14 hours ago) and read 6840 times:
Quoting airsmiles (Reply 12): Has Kingfisher now stopped operating into London Heathrow? I checked some schedules for various dates on Kingfisher's website and Heathrow's website and I can't see anything coming up? Is this a sign of further trouble?
Kingfisher ceased all international operations some time back.
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lightsaber From United States of America, joined Jan 2005, 10697 posts, RR: 100 Reply 14, posted (1 year 1 month 1 week 5 days 12 hours ago) and read 5679 times:
Quoting aeroblogger (Reply 7): If Kingfisher had stuck to their business model of catering to premium traffic, they never would have had to compete directly with Indigo anyway.
This I disagree with. In the US, the major airlines didn't think they were fully competing with WN due to lack of a premium cabin and hubs. WN instead did 'multi-stop' itineraries and now hubs (even if they don't call it that).
Looking at the size of Indigo, every Indian airline is competing with them. In particular now that they are going international.
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 15, posted (1 year 1 month 1 week 5 days 3 hours ago) and read 3506 times:
Quoting lightsaber (Reply 14):
This I disagree with. In the US, the major airlines didn't think they were fully competing with WN due to lack of a premium cabin and hubs. WN instead did 'multi-stop' itineraries and now hubs (even if they don't call it that).
Looking at the size of Indigo, every Indian airline is competing with them. In particular now that they are going international.
Lightsaber
Yes, but the USA situation was different.
FSCs in India have some clear product differentiators. You get a free meal. You get a jetbridge instead of getting bussed. You get free tea/coffee. You get more baggage allowance. You get frequent flyer points. They have premium cabins. There are other differences as well, which are significant to some passengers.
These FSCs are targeting one segment of the population, the LCCs another. That makes competition more indirect.
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IndianicWorld From Australia, joined Jun 2001, 2403 posts, RR: 0 Reply 17, posted (1 year 1 month 1 week 5 days 2 hours ago) and read 3438 times:
I still think the main doubts exist around the product on offer, and whether it is what the market needs, or is willing to pay extra for.
It has struggled to gain any real foothold in the market, and it needs to readdress if its offering is the right one. It had a LCC and Mainline brand, which is being worked on now, but theres still so many douts about IT's actually place in the market.
The Indian market now needs some serious consolidation, as a profit is becoming far too rare it seems for any carrier.
LJ From Netherlands, joined Nov 1999, 4149 posts, RR: 1 Reply 19, posted (1 year 1 month 1 week 4 days 16 hours ago) and read 2775 times:
Quoting anstar (Reply 16): True - I believe Heineken are making a bid to take over the remaining shares in the brewing arm.
No they're not. Heineken is not the initiating party here. If Vijay Mallya wants to sell its stake (or part of it) there are probably agreements where he has to offer its share to the current shareholders first. Moreover no company would buy into a venture where the competition already owns 37%
Quoting aeroblogger (Reply 5): UB has plenty of takers - Heineken is very interested in growing their stake in the company.
However, if I'm not mistaken part of the loans by IT are covered by Vijay Mallya stake in United Breweries. Though not the entire 19% stake has been placed as collateral, once the collateral is called I won't be surprised if one of the current shareholders picks this up (and Heineken is a likely buyer). Moreover if current shareholders have the right to buy these shares before they come onto the market (which wouldn't surprise me). Selling its stake in UB would be an option. However, both these events are speculation only..
On topic: I think the article misses out on one vital point. The current IT has not only a lot of debt and looses money each day, it also has too many future commitments towards Airbus. The can cancel their orders, but that would require a lot of cash (which they don''t have) and/or extensive financing (which either costs a lot of money or will not come). Therefore, a bankruptcy is inevitable. Personally my feeling is that the current strategy is to downsizes the airline to a point where they can let it go bankrupt without too much implications (thus a controlled bankruptcy). Second, he tries to ensure he can restart with new investors after the demise of IT (and without the Airbus commitments).
BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Reply 20, posted (1 year 1 month 1 week 4 days 14 hours ago) and read 2655 times:
Quoting airsmiles (Reply 12): Has Kingfisher now stopped operating into London Heathrow? I checked some schedules for various dates on Kingfisher's website and Heathrow's website and I can't see anything coming up? Is this a sign of further trouble?
Kingfisher has completely ceased international operations and has withdrawn from IATA Clearing House.
BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Reply 21, posted (1 year 1 month 1 week 4 days 14 hours ago) and read 2648 times:
Quoting hohd (Reply 11): The reason that Indians do not have any loyalty is most of the frequent flyer programs are a joke and many are not even aware of it.
True, Jet has a horrible program. The reason they get away with it, is because "they're no worse than the other guys".
BLRAviation From India, joined Feb 2009, 194 posts, RR: 14 Reply 22, posted (1 year 1 month 1 week 4 days 14 hours ago) and read 2631 times:
Quoting aeroblogger (Reply 7): If Kingfisher had stuck to their business model of catering to premium traffic, they never would have had to compete directly with Indigo anyway.
Actually Rohit, the original Kingfisher model of a premium all economy service was unique and packed the flights.I used to travel with IT from its launch, and the day I saw "Kingfisher First" in Mallya's misguided attempt to compete with Goyal, I said, it is downhill from here.
aeroblogger From India, joined Dec 2011, 1363 posts, RR: 0 Reply 23, posted (1 year 1 month 1 week 4 days 13 hours ago) and read 2567 times:
Quoting BLRAviation (Reply 22):
Actually Rohit, the original Kingfisher model of a premium all economy service was unique and packed the flights.I used to travel with IT from its launch, and the day I saw "Kingfisher First" in Mallya's misguided attempt to compete with Goyal, I said, it is downhill from here.
I agree, their original premium all economy service was their best model. Adding first class was not the best move, but at least they were focusing on the premium traffic that their cost structure required.
There is absolutely no comparison between the quality of decision to add first class and the quality of decision to launch an LCC - the first decision made infinitely more sense.
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blackwidow From United Kingdom, joined Feb 2008, 86 posts, RR: 0 Reply 24, posted (1 year 1 month 1 week 3 days 9 hours ago) and read 2023 times:
Quoting airsmiles (Reply 12): now stopped operating into London Heathrow?
I saw an A330 just before easter.... What was the last day of service into LHR????
25 BLRAviation: Yes, I think so. I tweeted about it. @BLRAviation. 10th April was the last, which was Easter weekend if I remember.
26 HAWK21M: Looks very tough....the losses are mounting daily.
27 Cricket: There are a few too many issues with this story, the first being the assumption that Kingfisher 'owns' 20 aircraft - that is a fact that is not substa
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