"Welcome to a world without passengers"

Welcome aboard Kingfisher Airlines, where you are made to feel like an honoured guest
and not just a passenger. At Kingfisher, a flight is not a journey between two airports
but an experience of a lifetime.
-www.flykingfisher.com
The lines say it all. Currently debt laden, Kingfisher Airlines Limited, is India's
prominent airline having a wide network of destinations, with regional and long-haul
international services. It is one of six airlines in the world to have a five-star rating from
Skytrax. In May 2009, Kingfisher Airlines carried more than a million passengers, giving
it the highest market share among airlines in India.
The airline started operations on 9 May 2005. At the launch of the airline, Dr. Mallya said
"we are committed to achieving our ambition of making Kingfisher Airlines India's
largest private airline both in capacity and market share by 2010. The airline ushered
in a new era of luxury in India's domestic aviation sector with its brand new aircraft with
stylish red interiors, and smartly dressed crew and ground staff. Kingfisher was the first
Indian airline to have in-flight entertainment (IFE) systems on every seat with guests
and not customers being able to watch live TV in-flight.
Kingfisher took to the international skies, giving its guests a world-class experience. The
brand-new fleet incorporates the latest technology and each aircraft is fitted with a
personalized in-flight entertainment system and top quality programming content from
around the world creating an environment to cherish.
Kingfisher Airlines has its head office in The Qube, Andheri (East), Mumbai and
Registered Office in UB City, Bangalore. Its parent company United Breweries Group,
which is led by famous Indian Liquor Baron Dr Vijay Mallya. The airline has been facing
financial issues for many years. Until December 2011, Kingfisher Airlines had the second
largest share in India's domestic air travel market. However due to the severe financial
crisis faced by the airline, it has the fifth largest market share currently, only
above GoAir.

Before doing the strategic analysis on the basis of 7s framework, we will like to give a
brief on current financial crisis in the Kingfisher Airlines.
A huge mismatch between Assets and Liabilities
Ever since the airline commenced operations in 2005, it has been reporting losses. After
acquiring Air Deccan, Kingfisher suffered a loss of over
1,000 crore (US$220
million) for three consecutive years. By early 2012, the airline accumulated losses of
over
7,000 crore (US$1.54 billion) with half of its fleet grounded and several
members of its staff going on strike. Kingfisher's position in top Indian airlines on the
basis of market share had slipped to 5 from 2 because of the crisis. As response,
Dr. Vijay Mallya called on the Chairman of Central Board of Excise and Customs and
offered to pay up the dues by 13 Dec 11. Kingfisher bank accounts were unfrozen on
14th Dec 11. Due non-payment, several Kingfisher's vendors had filed winding up
petition with the High Court. As on Nov 2011, winding up petition of seven creditors was
pending before the Bangalore High Court. In the past Lufthansa Technik &Bharat

Petroleum Corporation Limited (BPCL) had also filed winding up petition against
Kingfisher Airlines.
During late February, 2012, Kingfisher Airlines started to sink into a fresh crisis. Several
flights were cancelled and aircraft were grounded. The cash-strapped airline claimed
that the disruptions will continue for four days due to unexpected events including bird
strikes which rendered aircraft out of service. The airline shut down most international
short-haul operations and also temporarily closed bookings. Out of the 64 aircraft, only
22 were known to be operational by February 20. With this, Kingfisher's market share
clearly dropped to 11.3%.The cancellation of the flights was accompanied by a 13.5%
drop in the stocks of the company on 20 February 2012. The CEO of the airlines, Sanjay
Agarwal was summoned by the Directorate General of Civil Aviation to explain the
disruptions of the operations.
In March 2012 the airline was suspended by the International Air Transport
Association from using its inter-airline fund clearing system, the suspension means the
airline will have to deal directly with other airlines when sharing revenue on services.

Application of Mckinsey 7S Framework

After the brief, we will now analyze the business model of Kingfisher Airlines and will try
to find out the bottlenecks in it using 7s framework.
Strategy
KFA is a pioneer in the concept of bringing luxury, glamour and lifestyle to the skies. The
brand image of the parent Kingfisher brand gave further credibility to its marketing
campaigns, featuring India's then top models. Kingfisher airlines sold the concept of
lifestyle through its glamorous airhostesses, red-the color of vibrancy, and added
hospitality which made every passenger feel like a guest on board-a-craft. It marketed
itself as a budget airline targeting the middle of the market. It used multiple promotional
campaigns, from having India's top model Yana Gupta on flight, to schemes on
discounted tickets, initially, to invite people to experience the 'good flying' concept. The
KFA treats its customers as guests. The belief that Kingfisher Airlines work with
is Points of Differentiation than Point of Parity. The KFA always tried to differentiate itself
from other rivals by trying to provide so called premium low cost service and hence tried
to combine the best of both worlds. But, while doing this, the cost increased quite rapidly
as compared to the revenue which resulted in not a single profitable year for the airline.
KFA started its operation in May 7, 2005, positioning itself as a budget carrier and not as
Low Cost Carrier (LCC). Some more strategies were followed to make it one of the
leading Airlines in India. Those are tabulated below.

It came up with a very appealing promotional line Fly the good times and it
reflected in the experience the company offered to its passengers.

KFA also launched Kingfisher express in order to tap into the growing LCC
segment.
It planned to re-launch its commercial air service called UB Airway again which it
had to withdraw it due to government restrictions.
The company gave best services to its customers that were like providing world
class interiors, and in-flight entertainment systems.
The company came up with only one class airlines rather than other airlines that
had Business Class; Economy Class the idea was to combine Business Class
experiences and Economy Class experiences in one.
Having a single class freed up more leg space for passengers when compared to
normal economy class flights.
The company started addressing its customers as GUEST rather than
passengers.
The company made its mark by providing its guests with more legroom and
bigger seats so as to provide better comfort.
KFA has set its sight to become Indias largest airline both is capacity and in market
share.
KFAs Promotional Strategies
As part of its promotional strategy, the marketing team of KFA showcased the airline as
the new flying experience. The following initiatives were taken as part of its
promotional strategy Advertisements hoardings at airports depicted the stylish interiors of the
Funliners, which conveyed youthful, fun-filled, and world class image.
INOX multiplexes in Mumbai publicized KFAs special offers for a month.
KFA was the official travel airlines for the cast and crew of Mangal Pandey- the
movie.
KFA made use of various fashion shows, celebrity golf matches, New Year
parties all to build its Kingfisher brand.
The UB groups monthly magazine called Pegasus published information about
KFA along with other information related to UB group.
KFA launched many attractive offers to promote its sales like the King Card in
association with ICICI Bank, in August 2005. This was meant to create loyal customers
for KFA by providing benefits like privileged access to lounges, restaurants, free
refreshments at airports, access to 180 golf clubs across India, special invites for
lifestyle shows.

In October, KFA launched Chill Times Offer in the month of August 2005 and
September 2005.
In October they launched the King Saver Offer which said Fly like a King,
dont play like one.
KFA targeted the frequent fliers business traveler segment, which was dominated
by Jet Airways. By offering a King Saver Booklet, This booklet contained six free
flight tickets and was presented as a free gift if the passenger bought two such booklets
each worth Rs. 26,999.Passengers could avail off this offer if they showed there Jet
Privilege Member (Gold or Platinum) card.
Financial strategies:
KFA came up with many new financial strategic moves that made it one of the leaders of
aviation industry the company had adopted following strategies:
It purchased brand new A320 aircrafts powered by the cockpit that was a
paperless environment.
In June 2005 KFA planned to order US$5 billion at the Paris Air Show, for 5 new
A350-800 aircraft, and five A330-200 aircraft.
KFA was first Indian carrier to place an order for A380s.
In November 2005 it placed an order for 30 A 320 and 20 ATR72-500 aircraft at
the Dubai Air Show. This ATR72-500 was worth US$750.
To further its expansion plan KFA put in its bid to buy Sahara in November 2005.How
ever negotiation came to a standstill when KFA felt the valuation of Sahara Airlines of
around US$750mn to US$1 bn. was too high.
KFA planned to make an Initial Public Offer (IPO) and rose around US$200 million that it
used for its fleet acquisition and route expansion activities.
With the view of expansion in mind and touching the foreign skies, KFA acquired Indias
another ailing low cost carrier Air Deccan but for that, KFA had to paid hefty amount.
According to Indian Aviation laws, no Indian airline can fly in foreign skies unless, it
completes domestic 5 years of operations. Hence, to make the foreign sky accessible to
KFA, after starting operations in May 2005, Dr Vijay Mallya set up Kingfisher
International Inc. (KII), a subsidiary in US for its international operations. By this, KFA
tried to set up an international base outside India and fly into India from abroad. But
later, KFA acquired Air Deccan and on behalf of combine experience of Air Deccan and
KFA being greater than 5 years, got permission from DGCA to fly into the international
skies. Hence, strategically KFA was moving ahead aggressively but on account of heavy
losses.
Human Resource Strategies

Prior to launch, KFA signed a non-poaching alliance with Air Deccan under which both
the airlines agreed not to hire each others employee. KFAs flight attendants called
Flying models were selected through a national level model contest.
KFA also stressed the fact that its employees had to be capable enough to meet the
airlines high service standards.
Among one of the biggest HR move for KFA was addition of Nigel Harwood as Chief
Operating Officer with effect from August 1, 2005, to strengthen its management team.
It can be seen that one more strategic failure of KFA was changing Air Deccan to
Kingfisher Red. With Kingfisher Red not really gelling in with the entire Kingfisher
portfolio of products and services, the frugality of the brand impacted the brand equity of
Kingfisher. After all, Kingfisher Red has tried to match up to Kingfisher in a number of
stark areas, for example, the color red itself. Hence, it created confusion in the minds of
Kingfisher First and Class passengers as well by trying to provide the similar service at
low cost.
Hence, strategically KFA was very aggressive while doing expansion, promotions and
enhancement of management but then due to system failure and some structural faults,
it was facing some serious problems. Let us elaborate on those issues one by one.
Structure
The KFA when started Dr Vijay Mallya was the Chairman, CEO and Managing Director
for the airline. And he was handling all these positions till August 2010. This may have
created bottleneck in KFA, in the form of aviation experience and market understanding.
The question which comes in mind, how can Mr Mallya, who is very of very shrewd mind
when it comes to business, was ignorant regarding a full time CEO? Was this passion of
Dr Mallya regarding airline that made him not to appoint a full time CEO for such a big
business? At both of his other major and very successful businesses, United Spirits Ltd.,
and United Breweries Ltd., Mallya had very strong and capable CEO's in the form of
Vijay Rekhi and Kalyan Ganguly.
After August 2010, he appointed Mr Sanjay Agarwal, one of the most "eligible
bachelors" in Indian aviation then, as CEO of KFA, while continuing himself as
Chairman and MD. Having a good experience of aviation industry, Mr Sanjay Agarwal
former CEO of Spicejet, has a challenging task of pulling the KFA out of debt.
System

Accordingly, changes have been made and Sanjay reports directly to Mr

Mallya. All Executive Vice Presidents and other officers report directly to
Sanjay. Mr. S.R. Gupte, Vice Chairman, chairs the Executive Committee of

which Sanjay is a member. According to us, the early decisions taken by Dr

Mallya have some problems. KFA is trying to play in three different fields
simultaneously as - premium business, premium economy and premium
low cost. Kingfisher's offerings span the entire market. Such a strategy is
generally not a very good one, as it does not send out a very clear
positioning message and may only serve to drive away customers from
both ends of the market segment, instead of serving both. Hence,
somewhere as a system, KFA is and has diluted its brand. Recently, KFA
has opted out from its so called premium low cost segment only to surprise
analysts and critiques who are expecting a boom in LCC market in India.
Style/Culture
The style of organizational work at Kingfisher is evident from the companys vision and
value statements.

Figure 3: KFA Vision and Values

Hence, KFA believes to work as a team. It believes in providing world class experience to
its guests (and not customers), which is evident when KFA says that, they are in
hospitality business. Though, the motive is good, KFA is least bothered about the cost,
partially it may be because of a strong support of the parent UB groups. But, due to
negligence towards cost factor, over the years, KFA has acquired a lot of debt and loans.
While trying to keep the guests happy, KFA slipped on suppliers and co-workers
happiness front.

Staf
There has been problem with staff for the KFA as it is unable to pay the salaries and
incentives to their staff. In February 2012, KFA has announced that it will give special
recognition to the staff which will remain loyal to KFA during these cash strapped and
debt laden days.
Skills
KFA has always been good in pooling talent for the company. Among one of the biggest
HR move for KFA was addition of Nigel Harwood as Chief Operating Officer with effect
from August 1, 2005, to strengthen its management team. In August 2010, KFA started
boasting about the new CEO Mr Sanjay Agarwal, who has very good aviation industry
experience.
Mr. Mallya said Kingfisher Airlines Limited has a first class management team not just
at top most level but also in the second line. This is part of the UB groups commitment
to human resources.
Shared Values

We think, the main problem with kingfisher is the shared values.

What it perceives as customer requirement is somewhat different
from the reality.
A typical LCC customer would have certain basic needs:
economy, convenience, comfort and luxury. The fact that the
customer chooses a LCC indicates one's sensitivity to price and
hence economy seems to be the first basic need. This is followed
by a need for convenience, which would translate into wants like

punctuality, appropriate baggage handling etc. Following this is a

need for comfort, which includes in-flight reading material, food
etc. that Kingfisher Red offers. And finally luxury, which would
comprise the entire set of value added services like personalized
entertainment that KFA (Class & First) provides. Perhaps, akin to
the "Maslow's hierarchy of needs" concept, the higher order need
might appeal only when the lower order one has been satisfied.
While Kingfisher Red had focused on higher order needs of their
guests, it has ignored the lower order needs of the guests like
punctuality and economy. It has forgotten points of parity like
scheduling, economy, cleanliness, connectivity while putting
emphasis on points of differences like tele-booking, free food, etc.
The Way Ahead for the King of Good Times
Kingfisher Airlines should focus on bridging its 'points-of-parity' before enhancing its
points of differences. It must improve its performance on key parameters like punctuality
& air fares and should not introduce points of differences which increase the air fare of
Kingfisher. KFA should reconsider its decision of stopping services of Kingfisher Red.
KFA should consider implementing a promotional campaign in mass media which
educates people about Kingfisher. While Kingfisher can continue with flashy ads
featuring models depicting exuberance and lifestyle, Kingfisher Red ads can be more
subtle focusing on safety, comfort & experience. It can be along the lines of "Queen of
your heart deserves to fly like one" campaign which Kingfisher launched in December
2007, which focused on emphasizing a comfortable journey for women. The idea is
amalgamate the two ends of the spectrum, to keep the consolidated identify of
Kingfisher, while clearly spelling out to customers the differences between its premium
and budget classes.