REASONS OF KINGFISHER AIRLINES’s FALIURE

Kingfisher airlines stumbled due to numerous reasons which have been elaborated below

Lack of definite Business model

Kingfisher first launched all economy class with food and entertainment system, later on, they
shifted focus to luxury business class on their aircraft, a lot of air travelers appreciated the
hospitality, aircraft condition and it’s ambiance when Kingfisher focus was on luxury.

After acquiring the Air Deccan they suddenly shifted focus on low-cost air traveling, frequent
changes in the hospitality and aircraft ambience made travelers lose their interest in the brand.

Acquisition for Expansion

Kingfisher airlines acquired the Air Deccan for the sake of expansion, as per the international
airline policy, any airlines should have minimum five years of domestic experience in their
respective area to get the international routes license, for the sake of international route license
Kingfisher acquired the Air Deccan, they never tried to syndicate these two companies to
improve their profits with its merger.

Without stabilizing in the domestic market to know the ground realities of the airlines industry,
Kingfisher stepped into the international routes where the competition is very high compared to
the domestic airways, when they planned about the international routes they hardly have three
years of experience, acquisition and expansion these two factors started throwing kingfisher into
downfall.

Economic Slowdown

Another external factor for the Kingfisher downfall is economic slowdown in 2008, Kingfisher
first started it’s international route from Bangalore to London in 2008, same year recession
affected the whole world, which is indirectly affected the air travel occupancy in international
routes, because of the recession, airplane fuel prices raised, airport charges for landing are very
costly in international airports around the world, all these external factors caused the Kingfisher
airlines to downfall.

Lack of Management

There was no single CEO continued for one year in Kingfisher airlines, there was a frequent
change in the top level management, Mr. Vijay Mallya never took any serious interest in day-to-
day operations, Kingfisher was a gift to Siddarth Mallya(son of Vijay Mallya) by his father on
his birthday, Siddarth Mallya who did not had any know how pertaining to the airlines Industry.

Thus, lack of proper expertise and experience in the airline industry caused the downfall of
kingfisher airlines.
High Operational Cost

Operational costs of the airline industry are very high compared to any industry, companies have
to buy the licenses for the routes, companies should invest in the aircraft maintenance, salaries
for the employees are very high.

Airports charges fees for landing and parking, aircraft fuel frequently changes as per the
international crude oil rates, the government collects huge taxes from the airline companies,
there is a lot of competition between airline companies, all these high operational costs without
good profit margin caused the Kingfisher to downfall.

Reason for indigo failures

Problems with A320 NEO engines
India's largest airline IndiGo, which flies four out of every 10 Indians, has had
to replace Pratt & Whitney engines on its 32 A320 Neo aircraft at least 69
times in the period May 2016-November 2017. This is an astonishingly high
number that raises a question mark over passenger safety in Indian skies. On
an average, a fleet of 100 aircraft requires about 40 such engine
changes/replacements in a 3-year period.
IndiGo says these are related to non-detection of chip, carbon seal lining or
combustor chamber lining in Pratt & Whitney 1100 series engines. The airline
calls these engine 'glitches' and 'non-safety' issues. Indigo's boroscopic tests
(which are used to test defects or imperfections through visual inspection by a
boroscope of aircraft engines and gas turbines, etc) detected these anomalies
in 69 instances. As per practice, the defective engines were replaced with other
engines. Such engine replacement is typically done overnight. After the
replacement, the defective engine is sent to the manufacturer to fix the
problem. The planes continue to operate with the replaced engines.
However, IndiGo's instances of single-engine failure in 18 months averaged one a week. Experts say these failures
were a sort of world record. And all this while passengers flying in such planes had no clue how serious the danger
was.
Success of indigo airlines
Indigo's stuck to its low-cost, single class model
unlike rivals Jet and Kingfisher
While Kingfisher and once market-leading Jet Airways
bought rivals, flew multiple plane models and struggled to
mix full-service and low-fare options, IndiGo stuck with its
policy of offering one class of no-frills service on a single
type of plane. Indigo has chosen to stick to the world's
best-selling single-aisle aircraft, the Airbus A320
Selling and leashing back planes
it maintains a young fleet by selling and leasing back its planes.
IndiGo uses six-year sale and leaseback agreements, so the airline
is constantly replacing its aircraft. This prevents the need for
overall checks and major repairs, which means IndiGo
understands how to work the margins.
Quality and detail key to good service
The third reason is Bhatia's obsession with detail and
quality. IndiGo's executives, including staff at the check-in
counters, air crew and sales and marketing staff are hired
only after Bhatia meets each of them individually. Besides,
the airline also employs far fewer people, with one of the
industry's leanest work forces.
The airline also broke industry standards with simple
things like turnaround time. This is the time taken for a
plane to be ready for the next flight between landing and
take off. IndiGo boasts of a turnaround time of less than
30 minutes.

Using technology smartly

Unlike manual systems used by other airlines, IndiGo
planes are equipped with a digital link system for for
transmission of short, simple messages between aircraft
and ground stations via radio or satellite called Aircraft
Communications Addressing and Reporting System
(ACARS). Before every IndiGo flight departs an automatic
message is triggered from the aircraft to its operations
control centre - and immediately the same departure time
gets recorded in the software. Similarly, the moment the
flight lands an automatic message is triggered from
aircraft to control centre.

Jet airways success

Jet Airways is sure flying high. Here are five things that have led to this
performance.

Low fuel cost

In 2015, the price of benchmark Brent crude oil fell 35%, while in 2014, it fell
48.3%. In India, fuel costs account for about 45-55% of the revenue of
domestic airlines, and a 4% drop in fuel cost adds around two percentage
points to the operating margin of airlines.

Jet Airways had the lowest-cost quarter boosting its profit, said Sabarad.

The jet fuel expenses for Jet Airways for the reporting quarter was
at Rs.1,235.36 crore against Rs.1,701.07 crore for the corresponding quarter
of the previous year, registering a 27.37% decline.
High aircraft utilization
K.G. Vishwanath, a partner at consulting firm Trinity Aviation Consultants
Pte, said the focus on operational efficiencies was starting to show results for
Jet Airways. Vishwanath, who was also former vice-president (commercial
strategy and investor relations) at Jet Airways, said the airline has registered
one of the highest aircraft utilisation at over 13 hours on the Boeing B737
planes.

According to an investor presentation, Jet Airways posted aircraft utilisation

of 12.7 hours a day for the December quarter, up 9.48% against 11.6 hours a
day for the corresponding quarter of the previous year.

Airplane utilization is a key performance indicator for airline operations and a

significant differentiator for domestic airlines.

Vishwanath said the strategy of Jet Airways was not adding new aircraft but
increasing available seat kilometres (ASKM) with the existing fleet. Jet
Airways had 12,617 million ASKMs for the December quarter, up 10.99%.

In fact, Jet Airways had 116 planes for the reporting quarter, one plane less
compared to the corresponding quarter of the previous year.

“Despite not adding much capacity, Jet Airways’ passenger numbers grew
faster than the industry for nine months of the current fiscal,” Vishwanath
said.

Ruthless cost cutting

Cramer Ball, chief executive officer, Jet Airways, said the key achievement
during the third quarter has been lower CASK (cost per available seat
kilometre), excluding fuel. CASK, one of the key competitive dynamics, for Jet
Airways was at Rs.3.20 for the third quarter of the current fiscal
against Rs.3.36 in the year-ago period.
Another airline executive, requesting anonymity, said Jet Airways has adopted
a ruthless network redesign to drop poor routes and add good ones.

Jet Airways also got its balance sheet fixed by repaying over Rs.2,700 crore
debt in nine months of the current fiscal.
Say no to discounts
Vishwanath said Jet Airways has managed to hold yields and did not
participate in fare discounting. He said the airline did not chase market share
and instead focused on results. Jet Airways maintained its market share of
21.2% for the December quarter.
“The margin expansion is coming through both unit revenue increase and unit
cost reductions. This is clearly showing the strong focus of the leadership team
to regain the numero uno position which it had ceded to IndiGo,” Vishwanath
said.

He said the airline is setting itself up for steady growth over the next few years.

The December quarter is also the peak season for airlines because of travel
during festivals and year-end holidays.

Impact Etihad Airways

Jet Airways further enhanced its synergies with partners, expanding its
codeshare partnership with strategic partner Etihad Airways PJSC, which has
a 24% stake in Jet Airways. Overall codeshare traffic witnessed growth of 28%
from 416,816 passengers carried in Q3FY15 to 534,104 passengers in Q3FY16,
with codeshare traffic with strategic alliance partner Etihad Airways and its
partner airlines growing by 86%.

Jet Airways, together with Etihad Airways, now has the largest market share
in Indian international traffic.

“Jet Airways will get more benefits on costs as the financial situation improves
and will be able to negotiate better terms on contracts along with Etihad
Airways group of airlines,” Vishwanath said.

JET AIRWAYS FAILURE

the airline fourth straight quarterly(October -December)

loss, bogged down by high fuel costs, high operating costs
and fierce ticket price wars between carriers.
Since April 2011, the airline has amassed losses of more
than Rs 1,100 crore over the past four quarters. That
translates into a loss of Rs 120 per share. Worse, the
outlook for the January-March quarter, and indeed the
quarters ahead remain murky as ever.
At current price levels, it's difficult to even fathom why a
foreign airline would pick up stake in Jet, if the
government gave the final go-ahead to foreign airlines to
pick up to a 49 percent stake in local carriers.
Inability to pay loans:the airline is heavily debt-
burdened - and struggling to meet its debt servicing
obligations. Jet's debt totalled about Rs 13,700 crore at the
end of March 2011. In the current financial year, however,
it made losses at the operating level (excluding other
income), which means that it did not even make money
from its operations to support its interest payments.

No proper business plan: the only reason it has been

able to limit its losses (at the operating level) is because it
generates income from its aircraft leasing operations and
the sale and leaseback of aircraft engines. However, in a
recent research report on Jet Airways, HSBC said that
these incomes are likely to be "cost neutral" because any
plans to lower debt with the proceeds are likely to be offset
by higher leasing costs. (The company still makes a one-
time gain when it sells an asset like an aircraft.)
"Given that Jet has made cash losses in all quarters so far
in FY12 (financial year ending March 2012), the likelihood
of using these additional cash flows for working capital is
high. Therefore, we believe that despite, these efforts, debt
levels are unlikely to reduce in any material way," the
report said.
Fall in share price: the brokerage also noted that if the
current operating environment persists, Jet's total
shareholder equity, or net worth (the difference between
total assets and total liabilities) will be completely eroded
by March. No shareholder equity and high debt is an
incredibly bad combination for any company.
Given the terrible situation the airline is in, it's hard to
understand why its share price has doubled over the past
six weeks. It also makes you think about the sustainability
of the current exuberant mood in the markets, when such
suspect stocks, which don't have sound corporate financial
performances to back them, roar ahead.