Kingfisher - What happened to a Great Company?

in 1915, the foundation of United Breweries (UB) and Kingfisher, its flagship
brand, was laid down with coming together of five breweries in South India.
Today, as per the United Breweries website, they are the undisputed king of the
Indian beer market and its flagship brand - Kingfisher is currently available in 69
countries.' In 1983, Vijay Mallya became the Chairman of United Breweries. He
has been credited with consolidating the group's holdings, shedding companies
which did not make sense to his business, and winning corporate battles like
Shaw Wallace, one of the oldest liquor manufacturers in India.?

It was in 2003, the time when most Indian businesses were riding on easy
liquidity and were getting into infrastructural projects that Vijay Mallya set up
Kingfisher Airlines as a wholly owned subsidiary of UB group. The airline started
its operations in May 2005. Kingfisher Airlines positioned itself as a glamorous
flying company with stylish red interiors and a sophisticated cabin crew. It was
also the first company to introduce In-flight Entertainment (IFE) systems to the
Indian consumers.

In 2007, Vijay Mallya acquired crisis ridden no-frills Air Deccan, which had a feet
of 71 aircrafts. UB group spent around Rs. 1000 crore for the acquisition.

In 2009, Kingfisher Airlines transported more than 1 million passengers, giving it

the highest market share amongst airlines in India.

It was after the merger with Air Deccan that the problems of Kingfisher Airlines
started. It was during this period that the company decided to enter into low-
cost markets and offer its customers cost efficacies.

It adopted a twin brand strategy to cater to the Indian market. The no frills
segment in the indian aviation industry grew but the market share of Kingfisher
Airlines did not. In November 2009, the company reported a net loss of 7418.77
crore during the second quarter of the fiscal years This was followed by capacity
reduction and huge layoffs by the airlines. Ironically, despite operating losses,
Kingfisher announced flights to Europe. In November 2010, though the
kingfisher Airlines Board approved a debt recast package, it was revealed that
the airlines debt stood at over &7000 crore."

It was in November 2010, that banks for the first time restructured Kingfisher's
debt and converted 1355 crore of debt into equity at a 61.6% premium to the
market price of Kingfisher Airlines stock. In 2012, kingfisher Airlines was
grounded, leaving its employees with unpaid salaries. Its cumulative losses ran
into 716,023 crore and its net worth fell to negative 712,919 crore by end of
March 2013. It was in 2015, that a 17 bank consortium led by the State Bank of
India took over possessions of the prized Kingfisher house estimated to be worth
Rs. 100 crore.

Lack of focus and frequent changes between a luxury brand and an economy
class brand were not the only reasons responsible for the bad condition of
Kingfisher. Economic slowdown in 2008 also contributed to the downfall of
Kingfisher. The economic slowdown of 2008 led to decrease in airline travel,
increase in the fuel prices, and landing and airport charges. These changes
coupled with high inherent operational costs of the airline industry were also
the factors which influenced Kingfisher's performance.

The end become very clear starting from the acquisition of the Air Deccan and
adoption of twin brand strategy by the airlines. The company pulled a fortune
into every unsuccessful attempt to revive the company and streamline its
operations. Like so many companies that are unable to adapt to new market
conditions and evolving industry dynamics, the company suffered through many
rounds of layoffs, restructurings and asset sales as management team
floundered.

Kingfisher, once a brand name that rivalled the greatest in the world may go the
way of other legacy companies that failed to learn and change with the
environment.