What Strategies Led to the Failure of Kingfisher?

1) What strategies led to the failure of Kingfisher?

a) Stuck in the middle: Kingfisher Airlines had established itself as the market leader in premium airline segment due to its higher seat pitch, personalized entertainment, hot meals, home delivery of tickets and valet services. Now they were entering LCC segment with acquisition of Air Deccan to focus on cost leadership. This acquisition led to duplication of man power requirement, handling multiple aircrafts which made decision making difficult.

b) Higher acquisition cost of Air Deccan: Kingfisher Airlines wrongly priced the cost of acquisition at Rs. 5550 million which was much higher for a low cost carrier (LCC).

c) Brand dilution: Introduction of Air Deccan as Kingfisher Red which was competing in low cost carrier segment led to confusion among existing Kingfisher premium customers.

d) No fuel cost hedging strategy: There was no strategy to tackle volatility in fuel prices by forward contract.

e) Non commitment from parent company: At the height of financial crisis owners could have reduced the financial distress cost by liquidating their personal assets. The equity raised could have been helped to increase the investors and lenders confidence on kingfishers.

f) Marketing issues: When Kingfisher Red was introduced, it automatically entered into domestic LCC carrier segment. As soon as Kingfisher realized that they had committed a mistake changing the business model of Air Deccan, it increased the price of Kingfisher Red, but by this time Kingfisher Red had become lost opportunity and even the management was confused if it would call it as a normal career or low fare career.

g) Operating in Premium Segment in Tier 2 cities – All the 27 ATR aircraft of Kingfisher airlines operated as a kingfisher class full service product even the ones which connected the tier 2 cities which will not