PolymerPlane
Topic Author
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Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:35 am

I just came across this,

http://www.atwonline.com/news/story.html?storyID=7235

I thought Kingfisher is an LCC
Another Airbus cancellation?

Cheers,
PP
One day there will be 100% polymer plane
 
Flying Belgian
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:46 am

I also thought Kingfisher was a LCC actor on the Indian domestic market.

Anyway some kind of consolidation will have to come up soon or later on the booming Indian market.


FB.
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kaitak
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:49 am

Well, at least Dr. Mallya is following Richard Branson's method for becoming a millionaire: start as a billionaire and set up an airline!

I wonder what impact this is likely to have on Kingfisher's long haul growth ambitions; it does have quite a large fleet on order.
 
2wingtips
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:51 am

Well their policy of ordering 5 of every Airbus WB won't help matters much, either  Wink
 
jimyvr
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:52 am

Cheap excuse. India's Richard Branson? meh.
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PanAm747
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:54 am

There is an article on Kingfisher in either Airliners or Airways (don't have them with me at the moment!). The founders plans are quite impressive - even if I found them to be on the way-too-ambitious side.

The market in India, both domestic and international, is quite competitive. One over-expanded carrier is bound to cry "foul" every now and then. The smart businessman will figure out what earns him money and concentrate on that. I hope that's the case here.
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MaverickM11
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 5:01 am

Quoting PanAm747 (Reply 5):
One over-expanded carrier is bound to cry "foul" every now and then

I just really hope the Indian government doesn't come running when that happens and try to "fix" or "help" the situation.
E pur si muove -Galileo
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 5:01 am

There is some logic in his arguments. As promotional fares, many LCCs offer fares as low as 25 cents + taxes & surcharge. And these LCCs aren't making money either, they too are bleeding profusely. Trying to offer prices which are less than cost price is hurting the entire airline industry in India. Almost all airlines are losing money in India this year.
 
PolymerPlane
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 5:04 am

http://economictimes.indiatimes.com/articleshow/644381.cms

Wow, Mallya really is a whiner. If you read that article, all he does is complaining about fuel get taxed, competition, and law about flying abroad. Why don't just ask the government to give them money. It's easier.

Cheers,
PP
One day there will be 100% polymer plane
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 5:13 am

Quoting PolymerPlane (Reply 8):
Wow, Mallya really is a whiner. If you read that article, all he does is complaining about fuel get taxed, competition, and law about flying abroad.

The fuel is taxed at different rates in different states and varies widely between 4% to 20%. This is an issue facing all airlines, and many airlines have been asking the govt to have uniform taxes. The law about flying abroad is an absurd law which specifies that an Indian airlines needs to be in operation for atleast five years before they can fly abroad. Meanwhile, new startups from other countries are allowed to fly to India, and they are busy establishing themselves while Indian airlines aren't allowed to.

Industries in all countries lobby their governments to get favorable terms to conduct their business and Mallya is no different. And he isn't the only person to have raised these issues, Gopinath of Deccan airlines, IA and AI have all raised the issues at different times.
 
BestWestern
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 6:12 am

Ive flown Kingfisher over ten times this year, and the product excellent, aircraft spotless, and the crew amazing.... The Kingfisher economy product is far superior to any European short haul business class service. Even on short ATR routes a full hot meal is served, with a minimum three choices (veg, non veg, fruit platter - and on some routes Jain).

However the product quality, and the fare they are able to charge doesnt match up. There are too many airlines fighting for the same routes. Kingfisher, and Deccan will survive, but those in the middle (spice, go, paramount, indigo) unfortunatly wont in my opinion.
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PolymerPlane
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 7:44 am

Quoting Blrsea (Reply 9):
The fuel is taxed at different rates in different states and varies widely between 4% to 20%. This is an issue facing all airlines, and many airlines have been asking the govt to have uniform taxes

And why is this a problem? every airline faces the same price right? Just like every airport here charges different landing fee, rent fee, and other things. Airlines adjust to different requirement and charges.

Quoting Blrsea (Reply 9):
Industries in all countries lobby their governments to get favorable terms to conduct their business and Mallya is no different

Of course, every business lobby to get the best deal out of government, but they don't blame government for their losses.

Quoting Blrsea (Reply 9):
The law about flying abroad is an absurd law which specifies that an Indian airlines needs to be in operation for atleast five years before they can fly abroad. Meanwhile, new startups from other countries are allowed to fly to India, and they are busy establishing themselves while Indian airlines aren't allowed to.

So? the domestic airline doesn't fly those routes anyway. It's different market and different competition. That's not the reason they are not profitable. I can agree with your argument about not being able to establish themselves, but that's not the reason why they're losing money.

Cheers,
PP
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blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 7:48 am

Quoting PolymerPlane (Reply 11):
And why is this a problem? every airline faces the same price right?

Yup, and is there any wonder that almost all private airlines are losing money in India today?

Quoting PolymerPlane (Reply 11):
That's not the reason they are not profitable. I can agree with your argument about not being able to establish themselves, but that's not the reason why they're losing money.

The international routes out of India are pretty profitable right now, and Indian airlines can make money there which can subsidize their domestic operations.
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 7:51 am

Airline chiefs take ATF, tax issues to Chidambaram

Quote:
Airline chiefs from the aviation lobby group the Federation of Indian Airlines (FIA) met finance minister P Chidambaram on Monday with a list of fiscal complaints. The CEOs conveyed details about the state of their industry and asked for a relief from taxes that they claim are among the highest in the world.

The prominent among the demands was for aviation turbine fuel (ATF) to be notified as declared goods so that it attracts a uniform 4% duty all over the country.

ATF is currently taxed at an average of 27% by states. The low-cost airlines say their fares can come down substantially if tax rates are rationalised.
...

The group subsequently met at national carrier Indian’s office to discuss the future course of action. FIA members at the meeting, included Air Deccan CEO Capt Gopinath, Kingfisher chairman Vijay Mallya, Go Air MD Jeh Wadia, Air Sahara’s Alok Sharma, Air India chairman V Thulasidas, Jet Airways executive director Saroj Dutta, and Coimbatore-based Paramount Airways’ Thiagarajan.
...
 
PolymerPlane
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 7:59 am

Quoting Blrsea (Reply 12):
Yup, and is there any wonder that almost all private airlines are losing money in India today?

How will uniform taxation help the airlines making money?

Well, in Europe gas is taxed 200-300% yet the bus companies and taxi companies don't lose money.

In the US, gas is also taxed at a rate of about 50%, and business adjusted for that fact. I fail to see what is the relation between gas being taxed and airlines losing money. The fact is, when the gas price lowers, either by market mechanism or by tax reduction, they will still lose money.

Quoting Blrsea (Reply 12):
The international routes out of India are pretty profitable right now, and Indian airlines can make money there which can subsidize their domestic operations.

Not for that much longer. If every airlines are allowed to fly international, the same thing will happen again. Cut throat competition will lead to loss making company again, or every airline will subsidize their domestic market the same way, leading to the same result.

Either way, that model will not work, unless you are subsidizing domestic operations for feeder traffic purposes.

Cheers,
PP
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blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 10:00 am

Quoting PolymerPlane (Reply 14):
Well, in Europe gas is taxed 200-300% yet the bus companies and taxi companies don't lose money.

They would too if someone came along and started offering tickets for $0.50 and other operators were forced to match it to keep their customers. The same thing happened in US too few years back when all carriers were offering ridiculously low fares and no one was prepared to rise fares. Mallya is talking about similar situation in India today where some LCCs are offering fares as low as $0.50 + taxes.

They will take whatever relief that can be offered, in terms of tax or anything else  Smile

Each one of the points raised by Mallya has some merit when viewed in relation to others, and in the context of Indian aviation. That is what I have been trying to point out, that all these issues together are making all airlines in India lose money, not just kingfisher.

Airlines fly into Rs 2,100 cr loss; shake-up looms large

Quote:
Domestic airlines are flying into turbulence. Plagued by higher fuel prices, infrastructure constraints, declining yields and load factors, the domestic airlines — both full-service and low-cost — are together losing nearly Rs 6 crore a day. This means they could together tote up losses of Rs 2,100 crore, or $486 million, in the next one year.

...

Turbulent Times for Airlines in India

Quote:
...
While the passengers were benefited due to the drop in air fares, the industry as a whole was faced with mounting losses. In August 2006, Spicejet had reported a net loss of Rs. 414.2 million for the first year of operations. In September 2006, Deccan Aviation Limited, which operates Air Deccan, the largest LCC in India, reported a net loss of Rs. 3.4 billion for the 15 month period ended June 30, 2006. Jet Airways, a full service carrier, had also reported a net loss of Rs. 1.0 billion for the half year ended September 30, 2006, against a net profit of Rs. 1.6 billion for the same period of the previous year. Analysts opined that a combination of factors such as high ATF prices, rising labor costs, rapid fleet expansion, and intense price competition among the players was responsible for the losses in this sector.
...
 
Aviator27
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 11:23 am

Quoting PolymerPlane (Thread starter):
I thought Kingfisher is an LCC

Originally when Kingfisher Airlines started, they were an LCC. A few months later, they positioned themselves to be a "middle of the road" airline. Then several months after that, they decided to become a full service airline with first class seats. Next, they plan to put sleeper seats on airplanes for flights longer than 2 hours. Then they are going to add showers and ....

Quoting Blrsea (Reply 9):
The fuel is taxed at different rates in different states and varies widely between 4% to 20%. This is an issue facing all airlines, and many airlines have been asking the govt to have uniform taxes. The law about flying abroad is an absurd law which specifies that an Indian airlines needs to be in operation for at least five years before they can fly abroad. Meanwhile, new start ups from other countries are allowed to fly to India, and they are busy establishing themselves while Indian airlines aren't allowed to.

All airlines in India deal with the same problem of different taxes across different states. KFA and VM just complains about it more than anyone else. I do agree with you on the current standards for new airlines to fly abroad. It is completely unfair when a start up from another country can fly to India on day one but Indian carriers have to wait 5 years.

I think KFA grew too large too quickly and now they are paying the price for that. Other carriers such as Spicejet and Go Air are quietly doing their thing.
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 11:38 am

Quoting Aviator27 (Reply 16):
I think KFA grew too large too quickly and now they are paying the price for that. Other carriers such as Spicejet and Go Air are quietly doing their thing.

That doesn't hide the fact that Spicejet is running under loss and Go Air is yet to make their balance sheet public as it not yet a full year of operations. And their Rs 99 fares have had their share in the loss the company made. Even Jet Airways made a loss this year, and that was one of the most profitable airline company in India.

And if you look at the links that I have posted, the newly formed "Federation of Indian airlines" are lobbying with the government on the some of the issues that Mallya has raised. And Mallya being a well known businessperson in India and an MP, knows that his voice will be highlighted in the media.
 
manni
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 11:44 am

Quoting PolymerPlane (Thread starter):
Another Airbus cancellation?

http://www.airbus.com/en/corporate/orders_and_deliveries/




"The November order from TAM also included six widebody A330-200s. Other widebody orders in November were for three A330-200s from Afriqiyah Airways (a new Airbus customer) and five A340-500s from Kingfisher Airlines."

 Wink
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clickhappy
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 11:49 am

Lets say the Indian government agress, and decides to introduce some sort of legislation to better control all these airlines, how long do you think it would take before anything meaningful came of it? 20 years? Longer?
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 12:09 pm

Quoting Clickhappy (Reply 19):
Lets say the Indian government agress, and decides to introduce some sort of legislation to better control all these airlines, how long do you think it would take before anything meaningful came of it? 20 years? Longer?

The Indian govt will take atleast two years to decide before they do anything. But it is not just the Indian govt issue, even the airlines have to be accountable to their actions. You can't sell tickets at less than a dollar or less than cost and expect to be profitable.

1. In their mad rush to attract passengers, tickets are being sold at less than cost price by LCCs. And the LCCs in India don't enjoy any additional benefit as compared to full service airlines.

2. They save on the food served, and the salaries they pay to cabin crew and that is about it. Cost of food in India is pretty low, and the manpower cost is less as a percentage of overall costs compared to other countries.

3. As per all reports, the fuel cost is 30% of the airlines expenditure which is same for all carriers.

4. Due to paucity of trained cockpit crew, most of the airlines have expats in PIC positions, and they have to pay them the market rate.

5. In countries like USA, there are multiple airports serving a city, and LCCs use the ones which offer lower prices. In India, there is only airport for each major city, and the prices are the same for all operators.

The above points illustrate that the operating costs of LCCs are not significantly cheaper compared to their full service counterparts in India. So, selling tickets at abnormally low prices is sure way of going down.
 
lehpron
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 12:19 pm

Quoting PolymerPlane (Thread starter):
Kingfisher Losing Millions, Blames LCCs

Do they really blame lower cost carriers? Seems like something a fan would say.  Wink

Would/could changing their strategy improve or worsen anything?

Note: I know nothing of this airline, I first heard of them last year. Those questions I ask could forseeably be asked of any airline that isn't LCC-ish.
The meaning of life is curiosity; we were put on this planet to explore opportunities.
 
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clickhappy
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 12:24 pm

So, selling tickets at abnormally low prices is sure way of going down.

Well, its called a free market. The idea being that whoever lasts the longest "wins." So whichever airline that can afford to loose the most money, or buy marketshare, will win the war. Once your competition is eliminated you raise your prices.
 
stealthpilot
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 12:28 pm

Quoting PolymerPlane (Reply 8):

Wow, Mallya really is a whiner. If you read that article, all he does is complaining about fuel get taxed, competition, and law about flying abroad. Why don't just ask the government to give them money. It's easier.

That’s a pretty harsh statement don't you think?
Adding to what Blrsea said, the reality is that (to my knowledge) every single airline in India is losing money. IC AI 9W IT DN S2 , Go, Indigo, SpiceJet and others are all in the red (latest quarter, if not the entire year). If Air Deccan/SpiceJet were making money then VM wouldn’t really have a point.
The fact is that airlines are severely undercutting one another and the industry lost almost $500 million- which is a massive amount for an industry that is relatively small. If airlines charge $10 cents a ticket and everyone keeps their prices low while consistently bleeding money, then yes I believe the FIA have a very valid point.

Quoting Blrsea (Reply 17):

That doesn't hide the fact that Spicejet is running under loss and Go Air is yet to make their balance sheet public as it not yet a full year of operations. And their Rs 99 fares have had their share in the loss the company made. Even Jet Airways made a loss this year, and that was one of the most profitable airline company in India.

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blrBird
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 4:32 pm

Quoting Manni (Reply 18):
and five A340-500s from Kingfisher Airlines."

So finally this order shows up on Airbus list, I wonder why it took so long!

Quoting Blrsea (Reply 9):
The law about flying abroad is an absurd law which specifies that an Indian airlines needs to be in operation for atleast five years before they can fly abroad. Meanwhile, new startups from other countries are allowed to fly to India, and they are busy establishing themselves while Indian airlines aren't allowed to.

What kind of morons are these to make a law like that! Look at the west Asia based LCC's they are having a cake walk on sub-continental runs!
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trent900
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 5:51 pm

Quoting MaverickM11 (Reply 6):
I just really hope the Indian government doesn't come running when that happens and try to "fix" or "help" the situation.

For some reason when I read this I thought of a few airlines from the States which really shouldn't be around as we speak.

Do people here think the indian market is becoming saturated or is there still growth potential out there?



D.
 
Thorben
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 6:40 pm

Quoting Kaitak (Reply 2):
Well, at least Dr. Mallya is following Richard Branson's method for becoming a millionaire: start as a billionaire and set up an airline!

Branson seems to making money with his airline.

Quoting 2wingtips (Reply 3):
Well their policy of ordering 5 of every Airbus WB won't help matters much, either Wink

Why not, most carriers seem to make more on international flight than on domestic ones.

Quoting Manni (Reply 18):
"The November order from TAM also included six widebody A330-200s. Other widebody orders in November were for three A330-200s from Afriqiyah Airways (a new Airbus customer) and five A340-500s from Kingfisher Airlines."

Yes, they firmed it up in November. But is Afriqiyah really a new Airbus customer?

Quoting BlrBird (Reply 24):
So finally this order shows up on Airbus list, I wonder why it took so long!

Price negotiations. It is normal that some time passes between the announcement and the final sealing.
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mk777
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RE: Kingfisher Losing Millions, Blames LCCs

Sat Dec 02, 2006 11:17 pm

Quoting 2wingtips (Reply 3):
Well their policy of ordering 5 of every Airbus WB won't help matters much

Well i know you're being funny, but they haven't ordered the A346 yet? Big grin

I think the airports at the metro cities need to be fixed soon before the airlines in India can make money. So much wastage of fuel by circling in air, too much time on ground, all contributes to money loss. Hopefully by 2010 onwards, when the airport infrastructure gets better, the airlines might start to make money, just a thought.  Smile
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cityjet
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 1:11 am

It seems Kingfisher is a poor loser.

Both Kingfisher, AI IC and Jet charge extremely expensive fares for a 2-3 hour domestic flight in India - much more then what would normally be charged in Europe or US.

The LCC are not really low cost - they are just cheaper then the traditionals.e.g. flight from Del to TRV - over 4 hours length will set up you back circa 250-300EURO...which is about normal for a flight of similiar length in Europe for a traditional carrier but last minute fares for the likes of Ryanair or Easyjet.

For sure the 0.50€ fares are not for every seat !

So why are Indian traditional carriers so more expensive and Indian LCC not so cheap ?

PS. Will fly DEL to TRV in December and looking forward !
 
blrsea
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 1:42 am

Quoting Cityjet (Reply 28):
So why are Indian traditional carriers so more expensive and Indian LCC not so cheap ?

Look at my post #20 for reasons why the LCCs are not really that cheap. And the tax rates on ATF varies a lot, and airport charges in India some of the highest in the world. Plus as mentioned earlier, due to congestion at almost all major airports, planes are circling for 20-30 mins for each flight eating up fuel.
 
Thorben
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 2:42 am

Quoting Mk777 (Reply 27):
Quoting 2wingtips (Reply 3):
Well their policy of ordering 5 of every Airbus WB won't help matters much

Well i know you're being funny, but they haven't ordered the A346 yet? Big grin

I wouldn't rule that one out. The A345s are for North America, the A380s will not come for a while, and the A330s might become to small for some routes, like LHR or FRA.
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mk777
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 2:59 am

Quoting Thorben (Reply 30):
I wouldn't rule that one out

Well cool, maybe an A346 in IT colours would be quite nice...I am hoping to see IT at IAD, any a/c will do, though A345 would be nice (highly doubt it will happen), well i think if they do start, it will be the 1st regular A345 at IAD.
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kiramakora
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 3:15 am

Quoting Bestwestern (Reply 10):
There are too many airlines fighting for the same routes. Kingfisher, and Deccan will survive, but those in the middle (spice, go, paramount, indigo) unfortunatly wont in my opinion.

I agreed with most of your excellent post except one small detail. I do think that SpiceJet will survive; they have had consecutive months of being the airline with the highest loads in the domestic market and have coupled that with extremely cautious growth.

Quoting Cityjet (Reply 28):
The LCC are not really low cost - they are just cheaper then the traditionals.e.g. flight from Del to TRV - over 4 hours length will set up you back circa 250-300EURO...which is about normal for a flight of similiar length in Europe for a traditional carrier but last minute fares for the likes of Ryanair or Easyjet.

I am surprised. I just got a DEL-TRV flight 10 minutes back and paid EUR 130 return with all taxes.
 
tayaramecanici
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 8:11 am

Quoting Clickhappy (Reply 22):
Well, its called a free market. The idea being that whoever lasts the longest "wins." So whichever airline that can afford to loose the most money, or buy marketshare, will win the war. Once your competition is eliminated you raise your prices.

Absolutely, the Indian aviation story is no different from the mature aviation markets in rest of the world. Except for Southwest every other major airline has struggled to stay afloat before hitting paydirt.
The difference between KF and rest of the LCCs in India is that KF is trying to market itself as a Executive airline in a thrift indian domestic market. Most of VM's actions are concentrated at marketing the airline, increasing its cost i.e. Sponsorships, Recruiting hosties through modelling agencies etc. Whereas rest of the LCC especially Deccan has been trying to generate multiple revenue streams besides the seats.
On the issue of Expat ops crew too, Deccan scouts the 3rd world countries in Asia and Africa for its crew resources whereas KF poaches them directly off Deccan offering them x2 the wages paid by Deccan, the same goes for engg crew - the 2nd largest wage earners after pilots. KF has ordered WBs for the Intl ops, it is incurring cost on this fleet acquisition without any revenue from Intl ops. They have to spend major $$$ from 2Q of next year if they hope to fly USA in 1Q 2008.
Apart from the argument (In EU Ryan Air & EasyJet are increasing their ops out of high cost city airports) of single airport per major city, airlines in India have other means of reducing their cost the more thrift are doing it.
Personally i believe KF is trying to create a world class International brand to challenge the major Asian and EU airlines operating to the Indian market and he seem to be getting there on this count however the frustration at being unable to fly Intl as yet is getting to him but blaming the competition is petulant behaviour and can't be justified. OR this could be another ploy on the part of VM to pressurise the GOI to relax its Intl flt rules. Yesterday KF has declared a loss of $60m for this year, the aviation minister cannot afford being blamed for a collapse of the industry in India.
''You are as good as your nearest competitor'' Bob Crandall.
 
schipholjfk
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 3:52 pm

Quoting Kiramakora (Reply 32):
I am surprised. I just got a DEL-TRV flight 10 minutes back and paid EUR 130 return with all taxes.

Assuming you are an Indian citizen? It is common for all Indian carriers to charge foreign passport holders 2X or more for the same ticket. For years I have battled Jet Airways ticket agents when I purchased tickets in Delhi why I was charged more for the same ticket compared to someone with an Indian passport. Their answer, "Company policy." How they do that as India a signatory to WTO is beyond my comprehension. However, it may explain your lower fare assuming you are an Indian citizen.
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Nimish
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 5:02 pm

Quoting Cityjet (Reply 28):
It seems Kingfisher is a poor loser.

Couldn't agree more!

Quoting Schipholjfk (Reply 34):
It is common for all Indian carriers to charge foreign passport holders 2X or more for the same ticket

No more - I think the rules were changed last month to now make fares the same for Indian residents vs. foreigners.

Quoting Blrsea (Reply 20):
The above points illustrate that the operating costs of LCCs are not significantly cheaper compared to their full service counterparts in India. So, selling tickets at abnormally low prices is sure way of going down.

Excellent and accurate analysis. However that does not mean that Mallya can now starting to blame LCCs for loosing money - kind of similar to the kid crying "the dog ate my homework". Mallya knew the market he was getting into was very competitive, and he's seen what it takes to be an LCC in India. If he does not have the stomach to last out this period, he can shut shop or sell out. Crying is not going to help him or his airline.

If the LCCs are happy to offer fares at $.50 (BTW, the taxes/surcharges add up to at least Rs.1100 these days, so that's the cheapest a ticket can actually cost, with the tax being only Rs.221, and the rest going to the airline), good for them. They have a strategy and they're sticking with it. IT's strategy seems to be whining and crying and blaming LCCs (ridiculous in my opinion).

What is Mallya doing to ensure that his aircraft are flying at a full load? So the business travellers on BOM-DEL or BLR-DEL are an easy sort, since they like to be pampered and dont' worry too much about the ticket price. But now IT has launched numerous services on secondary sectors (like BLR-IXM). There's pretty much no place for a premium product/pricing on these secondary sectors. Is IT changing it's strategy to charge LCC type fares and offer LCC type services on these sectors? No, Mallya is too busy whining!
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Kevin777
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 6:25 pm

Quoting Bestwestern (Reply 10):
Ive flown Kingfisher over ten times this year, and the product excellent, aircraft spotless, and the crew amazing.... The Kingfisher economy product is far superior to any European short haul business class service. Even on short ATR routes a full hot meal is served, with a minimum three choices (veg, non veg, fruit platter - and on some routes Jain).

However the product quality, and the fare they are able to charge doesn't match up. There are too many airlines fighting for the same routes. Kingfisher, and Deccan will survive, but those in the middle (spice, go, paramount, indigo) unfortunately wont in my opinion.

Well, as you mention the problem with Kingfisher is that they have an excellent product, but what does that do for you if people don't want to pay the price associated with this? Come on, who needs first class seats and five star meals on a 60-minute flight from Bombay to Goa????? Or actually, the question is, who would pay for the associated added costs of providing this service on a short sector?? Probably only Mr. Mallya himself!

As for Kingfisher's survival? Yes I think it will, but not in its current form. The product has to be seriously revised (= downgraded). Also, Kingfisher has the backing of the UB Group, and no way in hell Mallya would let his flying crownjewel of his empire go down.

Quoting Aviator27 (Reply 16):
Originally when Kingfisher Airlines started, they were an LCC. A few months later, they positioned themselves to be a "middle of the road" airline. Then several months after that, they decided to become a full service airline with first class seats. Next, they plan to put sleeper seats on airplanes for flights longer than 2 hours. Then they are going to add showers and ....

And an onboard dance floor and.. Yep... this strategy has almost become a classic for airlines: You face tough price competition, so you think that the way out if it is differentiating your product. Well, goes for many industries, but sure as hell not short-medium haul air travel. The Kingfisher product (both Y and F) is a dead dog IMO, sadly, love their livery!

Quoting Thorben (Reply 26):
Quoting Kaitak (Reply 2):
Well, at least Dr. Mallya is following Richard Branson's method for becoming a millionaire: start as a billionaire and set up an airline!

Branson seems to making money with his airline.

Exactly! Branson and Mallya are only the same to the extend that they are entrepreneurs, not to the extend that they are wise businessmen in general - only Branson is. (Sorry, Mallya...)

Quoting Cityjet (Reply 28):
For sure the 0.50€ fares are not for every seat

Well, here is the thing: That is more or less the case!!!!!! I've been in India studying for 3 months now, flown quite a bit and done a lot of research on the fares. To my surprise it's not the same here as in EU/US AT ALL!!!... In Europe, FR or U2 or whoever's fares maybe start at 99 p + taxes, but we all know that those fares are only available on a fraction of the seats, and only if you book 3 months in advance. But not in India!! I just flew Ahmedabad-Goa on SG yesterday, a two-hour flight, for 3.000 Rupees, or around 50 EUR, including everything. I booked the flight two days ago! On Air Deccan, you could fly the same trip for 2.200 rupees!!!!! (but I had to take the earlier Spicejet flight), and this was the freaking walk-up fare (my friend took it)!!!!!!!!!!!!! AND - airlines like SG and 6E hardly sell anything onboard (SG nothing, you just get free water and biscuits), so no inflight revenue, which is a significant income for airlines like FR and U2.

I've done some research on this in general, and the conclusion to me is that most seats really go for these promotional fares - maybe not 50 cents plus taxes, but still, 30-40-50 Euros fo flights of one-two hours (including everything) is WAY below cost - and the planes I've taken have yet only been 60-80 % full, not that impressive for LCCs.

What NEVER ceases to amaze me is the apparent stupidity of these airlines!!! They are all loosing money by the TRUCKLOADS on a daily basis, yet they're all adding new routes and planes and destinations like the market is indefinitely huge! I just don't get it! It is absolutely economical suicide to be in the Indian airline industry right now, so why expand so heavily?!?!?!?

Just a few flight I've taken, all booked maximum 10-14 days in advance (not that it would have made any difference in most cases if I had bought a ticket a day before departure):

AMD-DEL, SPicejet: 2.500 Rupees
AMD-DEL-VNS, IC: 4.900 Rupees (including three meals!)
CCU-NAG-BOM, Indigo: 2.800 Rupees
BLR-MAA, S2: 2.200 Rupees
CJB-TRV, DN: 984 Rupees (!!!!!!!)

This is CRAZY!!!! I reckon break-even fares are at least double this, probably more! But makes for a lot of cheap flying!!!  Smile  Smile

Quoting Schipholjfk (Reply 34):
Assuming you are an Indian citizen? It is common for all Indian carriers to charge foreign passport holders 2X or more for the same ticket.

It seems to me airlines don't care about this anymore. I'm blond and blue-eyed and have had no problems whatsoever flying on IC or AI or S2 on Indian Rupee fares. So have many of my fellow students from Europe. AI even asked me if I was a foreigner, I said yes, and they still gave me the Rupee fare, that was half the dollar fare.

Quoting Nimish (Reply 35):
Quoting Cityjet (Reply 28):
It seems Kingfisher is a poor loser.


Couldn't agree more!

In its current form, I couldn't either, sadly..!

Kevin777  Smile
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Thorben
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 6:40 pm

Quoting Mk777 (Reply 31):
Well cool, maybe an A346 in IT colours would be quite nice...I am hoping to see IT at IAD, any a/c will do, though A345 would be nice (highly doubt it will happen), well i think if they do start, it will be the 1st regular A345 at IAD.

I guess they'll fly to JFK, SFO, LAX, and ORD before they fly to IAD. However, the range from DEL or BOM can be done with an A346.

Quoting Kevin777 (Reply 36):
Exactly! Branson and Mallya are only the same to the extend that they are entrepreneurs, not to the extend that they are wise businessmen in general - only Branson is. (Sorry, Mallya...)

Mallya is the 746th richest person in the world. He may have inherited some of his business, but he must have some skills.
France 1789; Eastern Germany 1989; Tunisia 2011; Egypt 2011
 
Kevin777
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RE: Kingfisher Losing Millions, Blames LCCs

Sun Dec 03, 2006 9:22 pm

Quoting Thorben (Reply 37):
Mallya is the 746th richest person in the world. He may have inherited some of his business, but he must have some skills.

Okay, let me clarify.. What I meant was, that in the airline industry Mallya has IMO shown all the skill of a poor airline manager operating as if in a highly regulated environment with skyhigh fixed prices leaving the only competitive parameter to service attributes. Might have worked in the 80's, but not in 2006 in India.

I'm sure Mallya has many other skills, though, he does manage to produce excellent beer and he does a nice job lobbying for more liberal alcohol policies all over India at the same time! And he has become an Indian MP, not to forget.

Kevin777  Smile
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Thorben
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 2:06 am

Quoting Kevin777 (Reply 38):
What I meant was, that in the airline industry Mallya has IMO shown all the skill of a poor airline manager operating as if in a highly regulated environment with skyhigh fixed prices leaving the only competitive parameter to service attributes. Might have worked in the 80's, but not in 2006 in India.

I'm not sure he is such a bad airline CEO. IT may have made some losses, but in the long run they'll profit from the potential that India has. Currently, the airports are too small and they don't have long range planes. But when they get A330s, A345s, A380s and later A350s, they can operate between India and Europe, the US, East Asia, and Australia. This should give them the opportunity to make a lot of money.
France 1789; Eastern Germany 1989; Tunisia 2011; Egypt 2011
 
aerostar
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 2:18 am

Quoting Thorben (Reply 39):

I'm not sure he is such a bad airline CEO. IT may have made some losses, but in the long run they'll profit from the potential that India has. Currently, the airports are too small and they don't have long range planes. But when they get A330s, A345s, A380s and later A350s, they can operate between India and Europe, the US, East Asia, and Australia. This should give them the opportunity to make a lot of money.

that is true...now lets hope they can manage to stay afloat till the opportunities ripe. I have a feeling they wont be around when India truly opens up it's aviation doors..
 
Thorben
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 2:22 am

Quoting Aerostar (Reply 40):
that is true...now lets hope they can manage to stay afloat till the opportunities ripe. I have a feeling they wont be around when India truly opens up it's aviation doors..

Why not? They are backed by this billionaire businessman. Is this just a feeling or are there some facts behind it?
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tayaramecanici
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 8:55 am

[quote=Aerostar,reply=40]that is true...now lets hope they can manage to stay afloat till the opportunities ripe. I have a feeling they wont be around when India truly opens up it's aviation doors..


Do we have evidence to suggest this in any other Industry ? Indians dominate STEEL, DIAMOND, GOLD & ITES worldwide. They seem to hold fort in Telecom, Retail, Petroleum and Pharma, industries with higher profit ratio than aviation so why do think Indians will collapse in the face of trully open skies policy ?
Shed the STEREOTYPE matey.
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jacobin777
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 10:57 am

Quoting Thorben (Reply 39):
But when they get A330s, A345s, A380s and later A350s, they can operate between India and Europe, the US, East Asia, and Australia. This should give them the opportunity to make a lot of money.

Who's to say that by the time IT start flying those international routes, a lot of those won't already be "soaked up"(taken by other carriers)?

London-India route(s) is already seeing overcapacity....

Quoting Tayaramecanici (Reply 42):
Do we have evidence to suggest this in any other Industry ? Indians dominate STEEL, DIAMOND, GOLD & ITES worldwide. They seem to hold fort in Telecom, Retail, Petroleum and Pharma, industries with higher profit ratio than aviation so why do think Indians will collapse in the face of trully open skies policy ?
Shed the STEREOTYPE matey.

Maybe he was referring to IT in particular...
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HAWK21M
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 2:58 pm

Amazingly only Cargo operators have registered a profit.With Rising Salaries & cheaper Tickets the profit margin is reducing.
regds

regds
MEL
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aerostar
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RE: Kingfisher Losing Millions, Blames LCCs

Mon Dec 04, 2006 3:00 pm

Quoting Thorben (Reply 41):
Why not? They are backed by this billionaire businessman. Is this just a feeling or are there some facts behind it?

It's just a theory...any smart businessman will only stand to loose so much money before looking for a way to scale down/bail out.

Quoting Tayaramecanici (Reply 42):
Do we have evidence to suggest this in any other Industry ? Indians dominate STEEL, DIAMOND, GOLD & ITES worldwide. They seem to hold fort in Telecom, Retail, Petroleum and Pharma, industries with higher profit ratio than aviation so why do think Indians will collapse in the face of trully open skies policy ?
Shed the STEREOTYPE matey.

Where in my post do you see me saying kingfisher will go out of business because it is Indian owned? Did you actually read what I had to say before responding?
 
Aviator27
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RE: Kingfisher Losing Millions, Blames LCCs

Tue Dec 05, 2006 12:50 am

I believe this is VM third shot at running an airline. Correct me if I am wrong, but I think he owned EastWest Airlines and another airline whose name I do not remember. Maybe some of the aviation enthuasiast who have been around the Indian aviation scene might remember the name. Anyhow, KFA keeps offering me a job. I keep turning them down because I believe they won't last that long. Their load factor is in the low 50% range. VM hasn't figured out what airlines in the USA have figured out. People want great service, they just don't want to pay for it. This is why many airlines in the USA do not even offer an F product anymore, even on international flights. KFA is offering almost the same price as the other LCCs just so he can get people on-board. That is a recipe for financial disaster. Someone hit the nail on the head also. Maybe his product will do well on DEL-BLR but it will not resonate on the non-metro routes. He and a lot of other people think KFA will suddenly be profitable if he's allowed to fly international. Prices for tickets to India have hit rock bottom with the increase in the number of seats to the country. His margins will also be under pressure there. I also know he wants to equip the A330/A340's with half of the airplane with first class and sleeper seats. He may have the best product flying out of India but can he make money? Again, VM doesn't own KFA. It is owned by UB Group which is a publicly owned company. VM just happens to be the Chairman of UB Group. He's beholden to the shareholders and he can't keep throwing money down the drain. Rumor on the street is he will turn KFA into a leasing agency and lease out all the airplanes the UB Group owns. I'm not in India anymore, so my information is dwindling. Having seen how the system works from the inside, all I can say is 1950 (the year). The system is bursting at the seams and there is no room for more airplanes and more flights. Delays will continue to get worse. The Indian consumer has shown a dislike for any attempts to raise fares. Everyone wants to fly DEL-BOM for Rs 2000. I know no airline can make money at those fares. Good luck to everyone involved.
 
karan69
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RE: Kingfisher Losing Millions, Blames LCCs

Tue Dec 05, 2006 2:21 am

Quoting Aviator27 (Reply 46):
Correct me if I am wrong, but I think he owned EastWest Airlines and another airline whose name I do not remember

No mate east west was most certainly not his----The owner was shot by the underworld causing the airline to fold up.

He did start a sort of regional airline with 2 aircrafts which closed within a mth of operations [not sure??]

Your facts are correct---as the indian consumer is very demanding and does not want to pay for it.

Karan
 
mk777
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RE: Kingfisher Losing Millions, Blames LCCs

Tue Dec 05, 2006 3:51 am

Quoting Aviator27 (Reply 46):
The system is bursting at the seams and there is no room for more airplanes and more flights. Delays will continue to get worse.

I sort of agree with you on this one. The Indian Govt. needs to revamp the indian airports, be it a metro or the non-metro before it allows airlines to start buying planes in plenty and also start serving routes to many cities/towns which are ill-equipped to handle air traffic. Fixing only the major airports like DEL, BOM, BLR, HYD will improve things but flights to smaller towns/cities will still be a headache due to lack of proper airport infrastructure here.

Quoting Aviator27 (Reply 46):
The Indian consumer has shown a dislike for any attempts to raise fares.

Which to me is surprising, since a few Indians like to show that they actually flew (for eg. DEL-BOM) than take the train and therefore, are willing to pay more for the airline ticket. However, i guess you might be right as these consumers have other options-trains which are connected to almost every part of India.
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tayaramecanici
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RE: Kingfisher Losing Millions, Blames LCCs

Tue Dec 05, 2006 6:24 am

Quoting Aviator27 (Reply 46):
He may have the best product flying out of India but can he make money?

He will definately make money and by the bucket loads, as soon as he's allowed to fly Intl. VM has undoubtedly created a brand couple of notches above the nearest Indian competitor (9W). KF will give the likes of EK, BA, VS & LH a run for their money on the Indian routes. As long as his product can attract sufficient pax ready to pay the premiums i don't see any reason why he wont be supported by the Indian traveller. You can bet that he will corner a large segment of the BLR Corporate traveller for obvious reasons.

Quoting Aviator27 (Reply 46):
Maybe his product will do well on DEL-BLR [/quote
Majority of the Intl travellers are from these Metros of BOM, DEL, BLR, MAA & HYD. With a FFP he will be in a better position to offer attractive fares to business pax settled in India travelling P2P on the Intl routes.
[quote=Aviator27,reply=46]but it will not resonate on the non-metro routes.

There is a lot of old money in rural India in the non-metros and these folks are quite savvy. KF is targeting this customer base but unfortunately without a convenient connections i.e. Better than the overnight First Class sleeper coach offered by railways, its not possible to attract this crowd. Classic example is BOMBAY - BARODA. The city of Baroda has the largest number of investors on BSE (stk exhg) apart from the large business community with connections to Bombay. Travel by late evening trains from Mumbai-Central to Baroda Junction and v/v is far more convenient for the business community as compared to Air travel. Where they have to add the travel time and cost of travelling to and from the airports at Dep & Arr. The same is on Bombay - Rural maharastra or say Pune -Goa. A overnight 8-10hr bus journey on a Luxury coach, including the rickshaw (Tuk-Tuk) fare to and from Bus station cost less than Rs1000/- for a family or a group travelling to Goa there is huge savings in this which can be allocated towards better hotel acc.
Unlike here in EU/USA where most of the airports are served by trains or buses in India you have to use the local TAXI mafia which wants to price its fares at a premium because you are a air pax.

VM will dilute his share holding in KF before he goes down. Right now there is over $1B of venture capital owned by Indians floating between BLR, HYD & MAA looking for good value investment in Tech co. In the abscence of good start-ups, Some of this will definately find home in the airlines, probably for a short period.The fundamentals of the Indian aviation industry is the best in the world, and has to be seen from the local context (1950s). Like in the Telecoms sector where India had to take a generation leap from landline to Mobiles, in the Transport sector Aviation is the only answer for India's transportation needs to sustain its growth. The road and rail networks will follow.
''You are as good as your nearest competitor'' Bob Crandall.