BANGALORE: Vijay Mallya is flying out from the low-cost aviation space in what is seen as a last attempt to salvage the debt-ridden Kingfisher Airlines. As of March 31, 2011, Kingfisher had a debt of Rs 7,057 crore on its books. The decision looks surprising given that the low-cost space is growing rapidly in India and clocking higher growth rates than full service carriers.
Speaking after the AGM of Kingfisher Airlines on Wednesday, Mallya said, "We are doing away with KF Red (the low-cost arm) as we don't intend to compete in the low-cost segment. We believe there are more than enough guests who prefer to travel the full service Kingfisher Class, and that shows through even in our performance , where the load factors in the Kingfisher Class are more than Kingfisher Red."
Mallya entered the lowcost arena four years ago with the $300 million acquisition of Air-Deccan . Mallya did away with the Deccan brand in August 2008, and introduced Kingfisher Red.
Kingfisher shifted over 70% of its route network to Kingfisher Red. But that wasn't able to turn the fortunes of the airline, which has not made profits since its inception in 2005.
Consultancy firm PricewaterhouseCoopers (PwC) data for July shows the average passenger growth across airlines was 22%. But lowcost airlines Indigo and Spice Jet registered growths of 38% and 31%, respectively. Kingfisher recorded a growth of 18%.
So, in hindsight, what does Mallya make of the Air Deccan acquisition? "The acquisition of Deccan gave us scale, increased our market share, but more importantly gave us the much needed infrastructure , historicity in arrival and departure slots, parking slots, which are very precious. We also got three hangars."
With the change in business plan, Kingfisher will reconfigure 35 Airbus aircraft, work on which would be completed in the next couple of months. The re-configuration would see a 10% capacity addition at a minimal investment , the airline said.
Mallya said he is awaiting approvals for several overseas routes, so that the airline can fly at night to improve aircraft utilization . Kingfisher's international operations now account for 20% of total revenues.
The company is also looking at a sale and lease back option of its aircraft in order to reduce the interest burden on its debt.
Commenting on the aviation market scenario, Dhiraj Mathur, executive director & leader, aerospace and defence , PwC India, said, "There is enough room in the aviation market for the two models-that of a full service carrier and a low-cost carrier-to run successfully. In the US there is one aircraft for every 50,000 people, whereas in India the ratio is one aircraft to 1.9 million people."
VIVEK KUMAR
PGDM 3rd Sem
Speaking after the AGM of Kingfisher Airlines on Wednesday, Mallya said, "We are doing away with KF Red (the low-cost arm) as we don't intend to compete in the low-cost segment. We believe there are more than enough guests who prefer to travel the full service Kingfisher Class, and that shows through even in our performance , where the load factors in the Kingfisher Class are more than Kingfisher Red."
Mallya entered the lowcost arena four years ago with the $300 million acquisition of Air-Deccan . Mallya did away with the Deccan brand in August 2008, and introduced Kingfisher Red.
Kingfisher shifted over 70% of its route network to Kingfisher Red. But that wasn't able to turn the fortunes of the airline, which has not made profits since its inception in 2005.
Consultancy firm PricewaterhouseCoopers (PwC) data for July shows the average passenger growth across airlines was 22%. But lowcost airlines Indigo and Spice Jet registered growths of 38% and 31%, respectively. Kingfisher recorded a growth of 18%.
So, in hindsight, what does Mallya make of the Air Deccan acquisition? "The acquisition of Deccan gave us scale, increased our market share, but more importantly gave us the much needed infrastructure , historicity in arrival and departure slots, parking slots, which are very precious. We also got three hangars."
With the change in business plan, Kingfisher will reconfigure 35 Airbus aircraft, work on which would be completed in the next couple of months. The re-configuration would see a 10% capacity addition at a minimal investment , the airline said.
Mallya said he is awaiting approvals for several overseas routes, so that the airline can fly at night to improve aircraft utilization . Kingfisher's international operations now account for 20% of total revenues.
The company is also looking at a sale and lease back option of its aircraft in order to reduce the interest burden on its debt.
Commenting on the aviation market scenario, Dhiraj Mathur, executive director & leader, aerospace and defence , PwC India, said, "There is enough room in the aviation market for the two models-that of a full service carrier and a low-cost carrier-to run successfully. In the US there is one aircraft for every 50,000 people, whereas in India the ratio is one aircraft to 1.9 million people."
VIVEK KUMAR
PGDM 3rd Sem
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