1. We have broken the shackles of conservative socialism
We have broken the shackles of conservative socialism. The growing middle classes want the kind of standard of living you enjoy in the West. So what I am selling is lifestyle.

2. Case Study

3. Indian Airline Industry
1953- Government of India decided to “guide the orderly growth and evolution” of the industry by creating two state-owned national carriers –
Air India (international) and Indian Airlines (domestic).
Air India- founded by J.R.D Tata in 1953 – first airline on India – taken over by government.
Air India and Indian Airlines retained a monopoly over civil aviation in India till 1922.
After the New Economic Policy in 1991, deregulation of Indian economy proceeded more aggressively which led to the opening up of the airline sector.
Response from government : i) allowance for operation of Air Taxis
ii) allowing operation of Scheduled Air Services
The new entrants started small with a few leased aircraft apiece, but opted different strategies.
Many airlines became non-functional to financial pressures much before entering 20th century.

4. Demands for business and leisure travel- Why?
Steady growth of the Indian economy at a compounded annual growth rate exceeding 6% increased the size of the economy.
Sensing opportunities – entry of new players in the airline industry- phase of development for the industry in 2003.
In spite of several fixed costs involved in the operation of an airline irrespective of the business model , many new airlines chose to use low fares as their main competitive weapon and hoped to create low-cost operations to make these low fares viable.
The air-traffic passenger in India is expected to grow at 18% per annum despite of the fact hat airlines are bleeding and are out of cash.

6. Kingfisher Airlines was started by flamboyant beer baron Vijay Mallya in May 2005shared the name of India’s leading beer brand.
More in keeping with Mallya’s style, Kingfisher quickly morphed into a full-service airline and went head-on with Jet Airways, though originally conceived and announced as a “Value Carrier”.
The airline had 51 A-320 family aircraft on order for delivery by 2014 and 50 wide-bodied aircraft on order for delivery between 2008 & 2018 for a planned international expansion.

7. Timeline
-> 2005: Begun its operations on 9th May with its inaugural flight being from Mumbai to Delhi. Jet airways and Sahara were the dominant players of the aviation industry. Kingfisher’s income for the year ending on 30th June 2006 was INR 13.5 billion but this could not cover up the losses amounting to INR 3.4 billion. ->2006: Kingfisher was soon becoming an airline with five-star air travel and was popular among business travellers. In December Kingfisher announced that it would provide live in-flight entertainment which was first in its class by partnering up with Dish TV India Limited. The income for period ending on 30th June increased to INR 4.1 billion but losses accumulated to INR 4.19 billion.

8. ->2007: By the year end on December 19th 2007 Kingfisher acquired entire 46% of Deccan Aviation in Air Deccan. The period ending 31st March 2008 generated gross income of INR 15.4 billion and losses were reduced to INR 1.8 billion but this does not include the aftermath of merger of Deccan. Since it was a streamlined and well planned year by Kingfisher, this year proved to be the best year right from inception till today. ->2008: Kingfisher Airlines became the largest passenger airline in the world’s second most populous country. Kingfisher finally got permit to operate on international routes and in September 2008 it flew for he first time from Bangalore to London. Kingfisher now started offering 3 lasses to passengers namely Premium Business Class, Premium Economy and Low fare basic class. Financial statements for year ending on 31st March 2009 were supposed to be consolidated of Kingfisher and Air Deccan hence the income increased by many times to 55 billion but so did the losses increase to 16 billion.

9. ->2009: Kingfisher was having a healthy market share value of 22
->2009: Kingfisher was having a healthy market share value of 22.9%with 11 million passengers flying in the last fiscal year. During the year Kingfisher won numerous titles from agencies around the world and continued being rated as India’s only five star airline by Skytrax for 3 years in a row. It been 4 years since birth of Kingfisher and shareholders were still waiting to receive their first dividend from the company but the company continued its run of losses and reported a marginally increased loss of INR 16.4 billion and gross income shrunk to 52.7 million for the year ending on 31st March >2010: Jet Airways surpassed Kingfisher Airlines to become the country’s largest passenger airline as it had a market share of 25.5% whereas for Kingfisher it came down to 19.8%. IndiGo was also getting noticed and was gaining market share rapidly. Despite increase in flights, Kingfisher failed to capture market unlike its competitors and this red flag unfortunately went unnoticed by the company. For the year ending on 31st March 2011, the company reported and increased gross income of INR 64.9 billion and reduced losses of INR 10.2 billion.

10. ->2011: Kingfisher declared of having some serious cash flow problems. It simply blamed the same to rising fuel costs. Kingfisher was not paying its dues to oil companies. Dozens of pilots left Kingfisher for rival airlines. Creditors warned the firm that if it would fail to raise almost USD 28 million in equity then they cannot restructure its debt. Yet Kingfisher was adamant to continue being the way they have been till now. The income for year ending on 31st December 2011 was approx. INR 13.4 billion and losses increased to sharply INR 4.4 billion. ->2012: The New Year celebrations were not even over yet when on 5th January 2012, State Bank of India (largest creditor of cash strapped Kingfisher) declared Kingfisher Airlines as a non-performing asset. SBI’s exposure to Kingfisher is staggering over INR 14.5 billion.

12. What went wrong?
Failed Low Cost Model -- It cannot be understood that why Kingfisher tried to replicate business models of international LCC(Low Cost Carriers)? If low cost was the only way to make money then Singapore Airlines would have been bankrupt by now. It seems like Kingfisher failed to study models carefully and blindly acquired Air Deccan. The primary way by which any LCC makes money is by operating on non-primary routes using secondary airports and then benefits are passed on to consumers unlike Kingfisher which charged low fare for Kingfisher Red but continued to operate at primary routes including metros. Kingfisher was a five star airlines and there was no reason to operate on two different business models at the same time. These were simply the over ambitious plans of the management of the Kingfisher airlines.

14. Competition
Extremely intense in aviation industry – 4 carriers fighting one on one.
IndiGo, Spice Jet, GoAir are almost as old as Kingfisher but they keep restructuring themselves - but have always stayed on course in business model
India’s LCC plus point – no compromise on quality and security unlike other LCC across the globe.
Second form of competition – RAILWAYS
Used by majority of population for short distances – flights are waste of time and money
Weakest point of railways – Quality
Kingfisher Airline – favourite of business travellers- assured five star treatment along with punctual arrival and departures.
Kingfisher forgot that it was the only one serving the minority and hence failed to capitalize upon its own strength and unique selling point (USP).

15. Bargaining Power of Buyers
Kingfisher Red introduced – enter into price war against all other carriers especially domestically.
Air Deccan – Re.1 tickets – Kingfisher had to continue such kind of marketing campaigns
Kingfisher reduced operational costs – Air Deccan marketing strategies trashed
Air Deccan – new concept – Kingfisher Red – take time to reap profits
Business fliers got rid of Kingfisher by buying free tickets and using up their miles- compromised airliner
Kingfisher realized its mistake – haphazard way increased orices of Kingfisher Red
Management was confused – call it a Normal Carrier or LCC
Biggest example of Failed Consolidation and failure in terms of merger and acquistion.