Adaptation versus Rigidity: Kingfisher Airlines

What makes one company succeed, while another, in the same operating environment, falter? Sometimes, luck plays a role but in most cases in business history, the difference between survival and extinction is more about discipline versus excess, adaptation versus rigidity. Just look at the divergent stories of Kodak and Fujifilm—both legendary firms in the film business. While Fuji realised its days were numbered and managed to reinvent itself by launching new—yet unrelated—business lines in things like cosmetics and optical films for LCD flat-panel screens, Kodak is a shadow of its former self because it couldn’t articulate a strategy beyond images.

In India, a similar tale of contrasting approaches—and fortunes—can be seen in the airline industry. While Kingfisher airlines cannot be relegated to the dustheap of airline history as yet, its abysmal performance in the last few years makes it stand out in stark contrast to IndiGo—India’s most profitable airline. Why did one soar and the other plummet?

One answer has to do with Kingfisher’s schizophrenic approach to a business model. Kingfisher was launched as an all-economy, single-class configuration aircraft with food and entertainment systems. After about a year of operations, the airline suddenly shifted its focus to luxury.

On the other hand, IndiGo preferred to wait and have a solid business plan in place. Its plan was to stick to operating a single configuration aircraft, providing point-to-point connectivity. The airline launched with one aircraft and had a plan to add an aircraft every six weeks, giving them enough time to stabilize

An experienced and professional team in the cockpit is a basic requirement for any airline to be able to withstand stormy skies. Yet, things went out of control further because Kingfisher never had a professional airline management in place. IndiGo’s approach was more measured and professional. It’s first CEO, Bruce Ashby, was in India 18months before the launch, and an experienced team at the management/board level has been key reason of IndiGo's success.

Another difference between IndiGo and Kingfisher is in the former’s ability to strike savvy deals—especially for its aircraft. The 100 Airbus aircraft deal signed in 2005 was a game changer as they managed to get an exceptional price and gave them the strategic ability to leverage it significantly.

Some companies just fail to learn—either from the examples that its peers may have set for the industry, or from its own past mistakes. Now, Kingfisher has decided to change its model yet again—discontinuing its Kingfisher Red brand and completely converting its fleet to a dual class, full-service configuration.

The positioning of the Kingfisher airlines was also a problem since beginning. The image was aligned to the ‘Life Size’ image of its promoter, Vijay Mallya. Where as it should be like focusing on the operation make it work before taking next step. You can’t expand business without putting the operation in place.

This raises the question in mind, how important the management is? Why management has to have a clear strategy and focus on operational efficiency. And how it is important to have a management which understands the business?

Business is all about having the killer focus on business!!

Indian Aviation completes it’s full circle.

In 1995, Singapore Airlines and Tatas came together and proposed to start domestic airline. The idea was to invest jointly and have few airplanes to begin with, and expand eventually.

But this idea ran in to troubled waters as both home grown domestic players and government opposed this idea. The reason; the international carriers (Like Singapore airlines) have deep pockets and world class experience and domestic carriers can’t compete with them.

Fast forward fourteen years; Indian aviation seems to have completed its circle. With recent FDI changes, government has proposed to open investments from foreign airlines; which was being pushed by domestic airlines for some time now.

The reason seems to be obvious. Private carriers, without any foreign airline competition; have been burning the cash. The cumulative looses of these private players sums up to about $2 Billion. And they are in need of additional funding to keep the things moving. Given the global market situation; it is impossible to raise fresh funds; so these players are desperate for funding.

With most of the airports being run by private operators, who have collaboration with international players, it doesn’t make sense to draw the line. In case of airport operators, even 100% direct investment is allowed.

More importantly; in the recent part, almost all countries have opened up the direct investment in airlines industry. One of the arguments in 1995 was that not most of the countries have this liberalized policy.

I tend to draw parallels between aviation and telecom sectors in India. Kind of telecom revolution we are experiencing was possible mainly because of international players like SingTel and Vadafone among others, who took equity stakes in Indian players and helped the industry grow. Telecom has 74% direct investment policy.

Lets hope direct investment in India in aviation sector brings up required competition and revolution; so that common people like you and me can fly easily, without hurting the purse!