Shri Dharmasthala Manjunatheshwara Institute for Management Development

Microeconomics

A Detailed Project Report

Submitted to:

Dr B Venkatraja

Associate Professor-Economics

SDMIMD, Mysore

Submitted by:

Group 4

Greeshma Sharath 21018

Hiranmayi N M 21019

Jack Cherian 21020

Jeffy Sharine E 21021

Krishna Ganapathy P B 21022

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Contents
ACKNOWLEDGEMENT.....................................................................................................................3
EXECUTIVE SUMMARY:..................................................................................................................4
INTRODUCTION:................................................................................................................................5
SWOT:..................................................................................................................................................6
TIMELINE:...........................................................................................................................................7
RISE OF KINGFISHER AIRLINES LTD............................................................................................7
FALL OF KINGFISHER AIRLINES LTD,..........................................................................................9
MICROECONOMIC FACTORS OF FALL:......................................................................................10
STRATEGIC ISSUES FOR THE FALL OF KINGFISHER AIRLINES:...........................................11
CONCLUSION:..................................................................................................................................13
REFERENCES:...................................................................................................................................14

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 ACKNOWLEDGEMENT

"It is difficult to set up a centre task report without the help and support of others. This one is
absolutely no special case"
At the actual onset of this project work, we would like to expand our true and sincere
obligation to everyone who had assisted us in this task.
We are unutterably thankful to our foundation Shri Dharmasthala Manjunatheswara Institute
of Management for nurturing us with valued based education. In addition to our faculty Dr B.
Venkatraja for his constant help and direction all through this task.
We extend our great gratitude towards our friends, who participated and supported for us to
gain ground in this venture.
To wrap things up our earnest affirmation goes to our companions for their dynamic direction
and care. With great appreciation and our much obliged, our heart is still loaded with the
blessings got from each individual.
Any elimination in this short vote of regards does not account for or doesn't mean to lack of
appreciation.

Thanking You,
Group 4 (Sec A)

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EXECUTIVE SUMMARY:

Kingfisher airlines founder Vijay Mallya had a growing share in the aviation industry with a
wide number of destinations and awards. It adopted innovative ideas to attract its customers.
It Achieved remarkable success by offering a comfortable flying experience to its passengers.
It's main was criteria is customer satisfaction.

The company has been posting deficits since the company started flights in 2005. In 2007 the
company acquired Air Deccan, which was moreover like adding fuel to the fire. It was
assumed that Vijay Mallya and his staff managed to fail to pursue the airlines with diligence
and that it was this transaction that brought down his reign. The purchase of Air Deccan and
the actions that followed gave the company a loss of above 10 billion (US$ 140 million) for 3
successive years.

In the Indian aviation sector, kingfisher Airlines had a short life span but had a long-lasting
impression. In the year 2005, the company introduced four new airbuses to start its
commercial operations. The airbuses flew between Delhi and Mumbai. In the year 2011, the
airline's company experienced a monetary crisis. Considering the brand reputation of the
company many private and public sector banks provided loans to which Vijay Mallya was
unable to recover. The private sector banks could recover his loan, but the public sector banks
could not.
In this report, we have tried to analyse the rise and fall of the kingfisher and have attempted
to emphasize the reasons for fall and rise, in connection with its strengths and weaknesses.

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Kingfisher Airlines

Established: 2003

Operations started: 9 May 2005

Operations stopped: 20 October 2012

Company parent: United Breweries Group

Headquarters: Bengaluru, Karnataka

Vision: “The KFA family will continually deliver a safe, value-based and enjoyable travel
experience to all our guests.”

Mission: “Kingfisher Airlines will have ‘Fly the Good Times’ approach and this will reflect
in the experience we will offer to passengers.

INTRODUCTION:

Kingfisher with its headquarters in Bangalore, Kingfisher Airlines Limited was created in
India. Founded in 2003, it began commercial operations in 2005. It possessed a 50% interest
by its parent company, the United Breweries Group, in low-cost Kingfisher Red carriers.
Sidharth Mallya, son of Vijay Mallya, received the firm as a present on his eighteenth
birthday. The second biggest part of the Indian domestic air travel business was held by
Kingfisher Airlines until December 2011. However, from its inception, the airline has been
losing money and has been forced to shut down its services on 20 October 2012.

On 9 May 2005, the carrier began commercial flights by flying a total of 4 modern Airbus
A320-200s from Mumbai towards Delhi. On 3rd September 2008, it began the latter's
international services by connecting Bengaluru to London. The company has been posting
deficits since the company started flights in 2005. In 2007 the company acquired Air Deccan,
which was moreover like adding fuel to the fire. It was assumed that Vijay Mallya and his
staff managed to fail to pursue the airlines with diligence and that it was this transaction that

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 brought down his reign. The purchase of Air Deccan and the actions that followed gave the
company a loss of above 10 billion (US$ 140 million) for 3 successive years.

Vijay Mallya declared on 28 September 2011 that the business would quickly halt Kingfisher
Red's activities since they no more believed in low-cost activities. They were facing huge
losses with the operations of Kingfisher Red. The company reported disappointing financial
performance on 15 November 2011, suggesting it was "drowning in high-interest loans as
having lost revenue”. In December 2011, Kingfisher's bank accounts were suspended for the
second time in two months by the Mumbai Income Tax Department as they failed to pay off
debts. At the period, it owed the service tax department~700 mil (US$ 9.8 million).

Around early 2012, with the majority of its aircraft stranded and some representatives of its
employees went on strikes, the company had incurred deficits of above ~70 billion (US$ 980
million). Amidst all this, the ranking of Kingfisher airlines among the Indian carriers based
on market share had fallen to rock-bottom from 2nd position. Kingfisher's licence was revoked
by the Directorate General of Civil Aviation on 20 October 2012 because it struggled to
resolve the demands of the Indian regulator concerning its operational activities. Its overseas
flying privileges and regional positions were cancelled by the Indian aviation authorities on
25 February 2013. The debt burden of Kingfisher Airlines emerged as the highest non-
performing asset of the nation's state-owned banks. On 2nd March 2016 following almost 3
years of Kingfisher Airlines' bankruptcy, the group of 13 Indian bankers headed by the State
Bank of India approached the Debt Recovery Tribunal to reclaim its dues, which comprised
Rs 9,000 crores outstanding by its founder, Vijay Mallya. At the same time, despite court
proceedings launched towards him by Indian banks, Mallya had left the country for the
United Kingdom.

SWOT:

STRENGTH: WEAKNESS:
 Support of the Parent Organization,  Extremely high ground and aviation

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 UB group operating costs.
 Service and creativity in Efficiency  (KF First &Class) high ticket Pricing
 About 80 Destinations  Tough rivalry from both Indian and
 Per Flight, fewer than 100 foreign players as well
individuals (employees)  Severe debt

OPPORTUNITIES:
 Expanding industry in travel
 Recognition in the Indian airspace
for offering the highest products and
services
 Rise in travel by air, with companies
and markets doing well
THREAT:
 Fuel prices increasing the labour
costs
 Excellent services are offered by
other low-cost airlines
 State railway projects with fast
running trains such as Duronto
 Economic Deceleration

TIMELINE:

RISE OF KINGFISHER AIRLINES LTD.

It was formed by India's richest liquor tycoon to become the industry's top carrier. Growing
business shares, a broad range of geographic locations, and several awards created a
tremendously enticing and imaginative vision for the company. They also achieved customer
satisfaction by offering a wonderful and safe flying experience to consumers

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They began industrial processes on May 9, 2005, with four new Airbus flying daily between
Delhi and Mumbai. The firm sought to provide worldwide facilities and surpass competitors
in products and services by using contemporary aircraft and excellent amenities like hot
meals, comfy seats, customizable entertainment, and treating customers like "guests."

They raised it to 104 flights per day in one year by launching seventeen aircraft and linking
sixteen locations, setting the record for the quickest airline introduction between 2005 and
2007. Around 2006, the airlines got a five-star rating and were popular among business
travellers. It has partnered with Dish TV India Ltd. to provide customised live in-flight
entertainment. On September 3, 2008, this airline began international operations with a trip
from Bangalore to London. Throughout 2008, the firm earned the distinction of being India's
first 5-star airline, and it became recognised for providing exceptional flight service to its
clients.

Kingfisher received several worldwide accolades in 2009, including becoming one of just
seven airlines to get a five-star rating from Skytrax. With a 26.7 per cent share of the aviation
sector, it eventually became the leading airline in the world's second most populated country.
Kingfisher Airlines operated around 250 planes daily.

Kingfisher Airlines has the largest market share it offered three types of travel to its
passengers:

• Kingfisher First was a business-class service intended for people who could afford to pay
more for better amenities. The Indian aviation sector, having carried over one million
passengers in May 2009.

• Kingfisher Class was a premium economy service aimed at stylish and belong to the upper-
middle-class people.

• Kingfisher Red had been a low-cost carrier that was a rebranding of Air Deccan and catered
to middle-class travellers on a budget

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FALL OF KINGFISHER AIRLINES LTD,

Kingfisher airliner which changed into playing emblem fee from patron pleasure needed to
face a monetary slowdown withinside the 12 months 2008. Adding to it changed into the
hassle of growing gas prices, the component in advance of difficulties. On September tenth x-
CEO of SpiceJet joined and assumed the function of MD and Chairman of kingfisher airlines.
Due to the coins crunch, KFA determined to go out Kingfisher Red which changed into its
low-value segment. According to the corporation's annual file for the 12 months 2011, it
changed into mentioned that authorities cash consisting of TDS and PF contribution changed
into now paid. Deviation getting worse and termination of global fights and cancellation of a
number of the home flights Happened. During the 12 months 2012 losses of Rs.7000 crores
have been accrued via way of means of the corporation. With maximum of its plane
grounded, this changed into the time whilst many body of workers individuals went on strike.
As all of the operations of the corporation have been paused. On 20 December 2012, the
airline needed to close down its operations.

Key observations:

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 a. Delegation is the main issue: When it comes to running his business, the chairman of
Kingfisher Airlines, Vijay Mallya says that he is taking things personally.
 
b.There was a contrast the two big businesses, the beer and spirit segments, who has
performed admirably under the leadership of managing directors.
 
c. Air Deccan is regarded as if it were a second-class citizen: Captain GR Gopinath,
whose low-cost carrier Deccan Airline was sold to Kingfisher Airlines, acknowledged
that the two sides of the company were incompatible.
 
d. Flight Interruptions: Flights are frequently boring, On domestic flights, the majority
of customers are uninterested in in-flight entertainment. They want to get to their
destination right away. In-flight entertainment is only available on international
circuits, yet it might be beneficial to a tired traveller.
  

MICROECONOMIC FACTORS OF FALL:

 The fall in demand: Synergy exists between the global economy and the air travel industry,
with the consequence that civil aviation would also be most impactive by any economic
downturn. The transportation industry by air is pro-cyclical.
Kingfisher airline ltd, owned by Vijay Mallya’s UB Group, said its loss for the first financial
quarter ended 30th June had widened because of the global slowdown, hit by falling demand
for passengers.
India.
 The fall in supply: The crisis in the aviation sector has reached airlines across the globe.
Many of them postponed the delivery of new aircraft which weakened the manufacturer’s
outlook for output.
 Fuel expenses: Kingfisher's single largest expense, jet fuel imports, fell by 53% to Rs.414
crore as local oil marketing businesses lowered rates in response to dropping global crude oil
prices.Due to rising fuel consumption and competition among airlines, the price of jet fuel
has steadily increased, and KFA has been unable to pay its obligations for the fuel spent.

 Ineffectiveness in terms of cost: KFA's employee costs were also greater than those of other
airlines. In 2012, the cost of KFA's maintenance navigation and landing was roughly 10.86

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 per cent of total revenue earned, which is 3% higher than Jet Airways'.Hence the fares were
not competitive.

STRATEGIC ISSUES FOR THE FALL OF KINGFISHER AIRLINES:

1. Mr Mallya's number one blunder changed into that he did not make the proper decisions. He
did not apprehend what clients desired and made all of his judgments primarily based totally on
luxurious sales. Airlines had seemed as luxurious tour via way of means of him, however in India,
handiest a restrained magnificence ought to have the funds for to pay greater for luxurious.
2. As a liquor tycoon, Mallya changed into not being able to differentiate among the 2
industries. Customers can be inclined to pay greater for booze, however now no longer for
transportation, because transportation can be greater of a want than a luxurious
3. Mr Mallya renamed Deccan Airlines like Kingfisher Red in 2008. As a result, Kingfisher
Airlines served each enterprise and financial system, passengers. This seems to be flawless,
however, it changed into now no longer. Mr Mallya changed into worried in a couple of industries
at an equal time. Except for aeroplanes, all of his liquor enterprise executives were chosen, and the
whole lot changed into strolling smoothly.
4. Mr Mallya's presence modified into required withinside the firm. According to sources, KFA
flew 366 home flights and 20 remote places flights. It additionally had a fleet of sixty-seven planes.
This increases the fee of leasing an aeroplane. The leasing condominium surpassed Rs.984 crores
in 2011, and sixty-six planes had been grounded considering then.
5. There changed into a factor in 2011 whilst Kingfisher changed into not being able to pay its
employees' salaries. Salaries had been to be paid in 4 to 5 months. Following this, employees
started refusing to signal the required "Tech Log," which certifies that the plane is secure to fly.
The Directorate General of Civil Aviation (DGCA) has become aware of this and took action.
KFA's licence changed into revoked.

Economic Stagnation:
Another outside detail that contributed to the Kingfisher's death become 2008 financial
costs for planes extended touchdown prices at worldwide airports because of the downturn, which
had a considerable effect on Kingfisher airlines.

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Inadequate supervision:
Mr Vijay Mallya by no means took any significant intervention in everyday operations, even though
the CEO modified numerous instances a year and top-degree control become failing. Later, on
Siddarth Mallya's (Vijay Mallya's) birthday, his father gave him an airline. He lacked the adulthood
to address the sort of huge airline commercial enterprise on the time, and because of a loss of enough
knowledge and expertise withinside the airline industry, Kingfisher Airlines suffered a dramatic
downfall because of terrible control.

CONCLUSION:

The Indian airline enterprise has skilled extremely good increase and transformation, that's
predicted to retain withinside the destiny years. During this time, numerous airways have
come and gone, whilst others have made sizable gains. The extensive and formidable
Kingfisher Airline challenge became seriously hampered with the aid of using the group's bad
strategic choices and mismanagement. Vijay Mallya cantered on reaching a glamorous repute
in place of trying to take advantage of this outstanding airline agency potential. The airline
has become recognized for its opulent design, cuisine, and atmosphere, in addition to its
formidable plans to set up itself withinside the worldwide market, however, it is not noted the
essential financial system class.
The method practised with the aid of using Vijay Mallya could not maintain for lengthy and
proved to be an amazing danger at an oversized scale to both, sustainability and stabilization
of the aviation sector. Mallya is now the only member left preserving directly to the brand.
For an enterprise to acquire achievement the maximum attention has to get on developing a
green work-frame, taking suitable choices, setting up a wholesome aggressive environment,

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enhancing excellent of carrier and status in cohesion to are searching for out the pleasant
answers to problems.

REFERENCES:
1) The Rise and Fall of Kingfisher Airlines.
(n.d.).https://www.ukessays.com/essays/tourism/the-rise-and-fall-of-kingfisher-
airlines-tourism-essay.php.

2) Kingfisher Airlines - Wikipedia. (2017, May 1). Kingfisher Airlines - Wikipedia.

https://en.wikipedia.org/wiki/Kingfisher_Airlines.

3) Panigrahi, A., & Sinha, A. (n.d.). (PDF) A Case Study on the Downfall of Kingfisher
Airlines. ResearchGate.
https://www.researchgate.net/publication/334319115_A_Case_Study_on_the_Downf
all_of_Kingfisher_Airlines.

4) Prerna, K., & Shrikant, K. (2016, January 1). A Study on the Rise and Fall of
Kingfisher Airlines-Indian Journals. A study on the rise and fall of kingfisher airlines-
Indian Journals. https://www.indianjournals.com/ijor.aspx?
target=ijor:tajmmr&volume=5&issue=7and8&article=003.

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5) The Fall of Kingfisher. (n.d.). The Fall of Kingfisher.
https://www.finnovationz.com/blog/the-fall-of-kingfisher.

6) The Rise and Fall of Vijay Mallya: Are India's Boom Times Ending? | India | The
Guardian. (2012, November 12). the Guardian.
https://www.theguardian.com/world/2012/nov/12/vijay-mallya-kingfisher-broke-
india.

7) D. (2001, May 1). Analysis Of Kingfisher Airlines. Analysis of kingfisher airlines.

https://www.slideshare.net/dspatra/analysis-of-kingfisher-airlines.

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