Kingfisher Airlines has fallen to the fourth place amongst the market share of domestic carriers in India, behind the Jet/Jetlite combine, Indigo and Air India. What next for the former no.1 domestic carrier in the country?
My bets are on Kingfisher right-sizing and slowly crawling into profitability. They showed signs of a very good decision by dumping the “Low Cost” Kingfisher Red brand, effectively killing the first “Low Cost Carrier” in India – Air Deccan. They are placing their bets on the full service model, and being the only carrier to offer a completely full service product in India.
This is nothing short of a brilliant decision, if executed well. A full service carrier with a full service cost structure can't suddenly decide one day to remove the sandwiches from its service and call itself low cost! That's what Jet did with Jet Konnect, and that's what Kingfisher did with Kingfisher Red. Both these carriers continued to offer the sops that a full service carrier would. Free check in baggage allowance, people to lift your bags at the check in counter and tag them to the destination, lounge access and miles for frequent fliers, and the list goes on. The carriers had already invested in these bits of infrastructure and staff at the airports, so might as well offer it to the passengers and differentiate themselves from other low cost carriers.
STRONG BRANDS
They may have gained a bit on their former brand value, but carriers like Indigo and Spicejet were positioning themselves as strong brands as well. And in the end, the consumer simply chose the airline that offered the cheapest fare for his preferred schedule.
How did this impact the marketplace? The airlines shot themselves in the foot by doing this, and they blurred the lines between a low cost carrier and a full service carrier. When you board an LCC abroad, you can hardly tell the difference between an LCC and a bus service. You check in on your own or you pay for any interaction with a human being if you've forgotten to print your boarding pass at home. You tag your own bag after you pay for the check-in bag. You walk to the aircraft. No free water! They fly you to a secondary airport far away from the main city and you need to take a bus to get out of the middle of nowhere. They run the aircraft like a bus service from point to point.
INDIAN SCENARIO
Cut to India. The only time you can tell the difference between a Low Cost Carrier and a Full Service Carrier is when you board and you don't get a free meal. And after taking away the meal worth Rs 100, the full service carrier cuts fares by Rs 1,000- 2,000. Does this make economic sense? Hardly! Worse, it's going to be very difficult for the full service carrier to charge that premium for its check in staff, for free check in bags, for an aerobridge at the airport and for free food and newspapers.
Kingfisher has to take this opportunity to go back to the basics, and do what it did in 2004 when it came to the market with a bang. It will have to shrink its capacity and its fleet and go back to its full service image and branding.
The recent DGCA report on fares falling in the December peak due to excessive capacity are a stark warning to airlines that if they continuously add capacity by adding new planes, something will be sacrificed – the something in this case being profitability. Kingfisher then has to slowly increase fares into profitability and target the market that still wants a premium product.
Just because a Tata Nano enters the market, it doesn't mean that Toyota removes the leather from its steering wheel and brands itself low cost. For heaven's sake, Toyota won't even bother about a Tata Nano, because both are attacking different market segments!
With a smaller fleet, Kingfisher can afford to raise fares without concern for the other predatory pricing animals in the market. Of course it needs to aggressively shrink its other fixed costs, staff and administrative overheads while doing this.
My bets are still on Kingfisher making a comeback and moving into profitability, albeit as a much smaller airline. The brand and the parent company are way too strong for the airline to fall by the wayside, and there is nothing wrong in shrinking into profitability than growing into the red.
(The author is a Bangalore-based freelance aviation consultant and writer.)