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Kingfisher Air: Revival Possible?

Friday, August 12, 2016

While surfing over Quora, there was this interesting question raised:

If you were to plan a revival strategy for Kingfisher airlines how would you do it?

First things first: As of 2016, Kingfisher Air is no more listed on the stock exchange. It is reeling under a debt of 7000 crores. As seen from financials at end of March 2013, they show a loss of 4500 crore. All I could read is that if Mallya does repay the loan, banks are going to earn a huge profit as the accumulated interest would be hefty. Though Kingfisher revival or airline sector revival is far away – NPA revival would be the first story to precede Kingfisher airline.

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Image Credit: Wikimedia Commons

For any new airline that is likely to enter – they are going to spend plenty of time and money in creating a brand. A smart move for them would be to simply buy over Kingfisher brand that has created its own unique charm around itself! That would be the simple biggest way for Kingfisher as a brand to see any revival. All this media coverage over a course of few years has given huge publicity to Kingfisher brand – impacting a higher brand recall though you may debate positive or negative.

Imagine if Kingfisher Air was to fly again, would it further hurt Mallya and banker’s profits or would be a first of its kind Indian rags-to-riches story, restored pride case or something that find its place in history pages of business cases as a re-successful venture? If Kingfisher Air were to be successful again, it is not just ordinary profit that would help them out as a reeling debt of 7000 crores is no joke. If we take profitability of Interglobe Aviation (Indigo), their last 5 years of annual profits do not equal 7000 crores! But, if we were to consider it as repayment towards banks, their profit numbers surely would make good news for NPA revival story. As of 2016, everyone is bullish on banking sector in India, sector which has seen highest investment from all fund managers.

As every B-school grad in India has enough cases on aviation, each one of them is an unknown expert on the topic. Guess, management at Kingfisher Air has plenty of advice all over. The best part is that Kingfisher as a brand is still intact due to the breweries business. Have you heard of Paramount Airways in the Indian domestic scenario? It was an airline that started in 2005 and ceased in 2010 – though certain chartered services still continue. You would understand the emphasis on brand impact with this analogy.

So, what possibly could work for Kingfisher were they to be in air again? They would need something that’s epoch-making, something that none of the grounded airlines have done in past and exceeding the usual profits of an ordinary airline. My quick thoughts around following industry best practices as well as differentiators:

  • No ownership of  aircraft; all leased aircraft to follow till the next wave of ‘good times’. This is standard practice across successful operators like Indigo, SouthWest and RyanAir. Numerous Kingfisher’s old aircraft were scraped – not even sold out but scrapped. Leasing might incur a higher variable cost but a lower fixed cost makes sense for a new business venture that is striving to grow. Other benefits of leasing include a newer and far safer aircraft – far reduced cost of maintenance; something that the group should fear.
  • Single aircraft type; You might very well know that IndiGo only has A320s in their domestic as well as international fleet; SpiceJet only carrier Boeing 737s. There is no harm in carving a niche around something fun like ATR-72. This single aircraft type helps the company in negotiating better with lessees – you are now going for more aircraft numbers. Other benefit of having a single aircraft type is reduced cost of training, now any pilot can take over any aircraft. Your permutation and combination complexity is simplified by a large margin.
  • Pilot Hiring; There is a clear oversupply of pilots in India who are well trained, not only from Indian institutions but from all over the world and they have no job of flying. Many of them have opted to join call centers and to take up menial jobs at airports. Wonder how much can Kingfisher negotiate with them? What if Kingfisher helps the to reduce their educational loan/debt payment? The longer you stay, more would the airline help you to repay your loan faster. Or, Kingfisher simply clears off their education related dues and signs a bond for working for a longer time. You’ll have enough takers there with the current supply-demand scenario.
  • Connecting smaller cities (connecting non top 10 cities): Needless to say, top routes like world’s 6th busiest Mumbai – Delhi and others need to be captured. Let’s imagine only a case of top 20 cities in India by GDP and population. Wonder how would the connection from the 9th ranked city to 19th ranked city currently looks like? (Pune and Patna) Isn’t it under-penetrated as of now… To make things simpler for an airline – what is the connection between 11th busiest airport by traffic in India and the 19th busiest one? (Indore and Trivandrum). Industry insiders would know better but potential can only be understood when tested – there should be enough data based research prior as a requisite. I was thoroughly impressed to see Indigo’s flight connection. On a travel from Kolkata to Pune, the flight had a route of Kolkata-Ahmedabad-Pune-Nagpur-Delhi. And return on the same day! So, there you see – how it is possible for them to do it! In my personal network, I’ve always wondered why Pune-Chandigarh/Kolkata flight does not exist despite the many and many business and leisure travelers that I’ve come across.
  • Connecting smaller towns with top cities: Other area can be to increase more connections to smaller towns from Tier 1 cities. Indigo’s first flight was from Delhi to Guwahati which no one had thought of as a profitable connection! You can always tinker around thoughts on how optimum connections would be – a combination of tier 1 and tier 2 cities should also do good. Enroute a flight to Jamnagar, I wondered why there was only 1 Air India flight in Jamnagar – Mumbai route that travelled both ways and stay parked whole day? The flight can keep travelling across the country generating more revenue. And that brings me the next point.
  • Lower turnaround times: The business of an airline can be profitable only when you are in air for maximum possible time. There is no harm in trying flights travelling over night at airports that have been kept open for flying by AAI. I would slow overnight ATR 72 flights that can depart from Mumbai at 1 AM and reach Delhi at 5 AM. I have taken 2 AM departing domestic flights in past and found them to be extremely time saving in past, giving me a full Sunday at my destination. An ATR 72 flies slower but has capacity to run for 6 to 7 hours! Wouldn’t this also address the competition from upcoming bullet or high speed trains in India as well as the overnight intercity buses across various destinations? This can be experimented by trying and testing various routes but what would help you buy more time in air is nothing but lowest turnaround time. Right from luggage management, queue arrangements and food logistics – an organized structured and standardized process across shall help you buy that time. Indigo’s on time promise is the consumer facing catchy marketing proposition but what they have given highest priority on their operations is to lowering turnaround time. I find it 2 sides of same coin.
  • Why frills? There is no problem in continuing with all frills that they offered in past by having additional charge and keeping them optional. Even if conversion rate is 15%, you have enough upselling done. Only the tie-ups with OTAs like MakeMyTrip would need an additional webpage for ticking options. Currently, the same exists for a few flights asking you for veg or non-veg meal preference. With information in advance, you know what is the required inventory. You can continue with digital displays, music and movies with them at a fractional cost.
  • Amazing discount tie-up partners: Most consumers have their unique online identity linked to their phone numbers. And now there is UIDAI’s Aadhaar linked with bank accounts. What if you get the most discounted flight but comes with a condition that full fare needs to be paid, discounts being credited after 75 days? That is a similar trick that wallet service of MakeMyTrip does currently and it has worked for them. What if you tie-up with the select 4/5 telcos in India and credit the discount to your telcos? I would totally love to see reduced billing solely due to my flying with a specific airline! And there is Apple Watch, Google Watch on the anvil. With 4G and IoT about to come forth, discount being credit to a phone bill is a unique value proposition. With convergence of banking, telecom with technology as an enabler, airlines can take advantage of this large base of tech-savvy consumer base coming their way. What if you can tie up with Amazon India where if same phone number has an account, you get instant discounts showing you how much of discount money can be used immediately? Payback currently offers this service and every time I am booking through MakeMyTrip, it clearly shows how much money can be discounted using Payback points. If not Amazon India, there are aplenty of them like Flipkart today who would sign up readily. For eg., I see a flight at a cost of 7,500 INR but discounted price is 4000 INR. I need to pay full 7,500 INR and discount of 2,500 INR would be credited back to my payment method after 75 days. It is assumed that lower price war would continue but this gimmick can provide you power to offer lesser prices. In those 75 days, airline can keep all accumulated discount money parked in a liquid fund and earn a smart 7% p.a. money. If I buy anything online within 75 days with an account linked to the same mobile number which was linked for booking,  what if one gets see to see a prompt showing the discount money? Discounts are discounts but what’s important is the brand recall and visibility that you are buying in consumer’s mind-space! Jet has a differentiated and privilege tag attached to them with their Jet memberships that can be extended to the online sphere by smart actions. Anyone who buys flight tickets surely has a habit of buying online through e-commerce websites. Analytics in aviation space are still unheard and I believe that like all consumer centric B2C businesses, aviation can benefit largely with adoption of analytics on their own consumer base to add value.

These ideas are pretty generic in nature and there is a cesspool of many more granular level thoughts beneath surface that have not been entered here. But, what lacks in the end is a will by management. I don’t find the current aviation industry in India very competitive not because of the low price proposition but due to the fact that newer ways of discounts and loyalty have not come up substantially. But, one thing is for sure – many would love to watch a historic business transformation that would involve game changing ways!

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