Kingfisher’s Wings are Clipped

The crisis at Indian carrier Kingfisher Airlines has deepened with the airline culling its entire international network as it attempts to overcome its current financial problems. The airline, which was on the verge of joining the oneworld global airline alliance earlier this year, has faced major operational problems over the past week as many of its pilots have again failed to turn up for work after allegedly failing to be paid. The problems were further compounded by the impounding of one of the airline’s Airbus A330-200s at London Heathrow, at the start of the week.

Kingfisher says its international operations are “bleeding heavily” and it has already started to retire some of its Airbus A330-200s from passenger service. “Positive and immediate action is being taken on all fronts to cut costs,” it said in a statement.

This week it has cancelled its five times weekly Delhi – Hong Kong service and daily links from Kolkata to Bangkok and Dhaka and from Mumbai to Hong Kong, London Heathrow and Singapore. Later this month it will close its routes from Bangalore to Dubai; Chennai to Colombo; Delhi to Bangkok, Dubai and Kathmandu; Mumbai to Dubai and from Tiruchirapalli to Colombo with availability on all routes ending from March 25, 2012. This will leave just a single international route between Delhi and London Heathrow, but according to its current schedule inventory this will only continue until April 10, 2012.

The table below highlights the airline’s proposed international network for the northern summer schedule, the O&D traffic demand on each route and the current competition. As can be seen, Kingfisher has faced competition on every one of the routes and it is unclear how quickly other operators will try to back-fill some of the lost capacity. Interestingly, Virgin Atlantic Airways has already confirmed plans to reintroduce flights on the Mumbai – London Heathrow route with a daily rotation from October 28, 2012 using an Airbus A330-300.

There have also been significant cuts in Kingfisher’s domestic network for the forthcoming Northern Summer schedules which begin at the end of this month with significant frequency cuts on a number of routes and cancellations across many other domestic markets. These cancellations include flights from Chennai to Coimbatore, Hyderabad, Mangalore, Tiruchirapally and Vishakapatnam; from Delhi to Ahmedabad, Amritsar, Chandigarh, Chennai, Gauhati, Jammu, Kolkata, Patna, Ranchi; from Hyderabad to Rajahmundry and Vishakapatnam; from Kolkata to Aizawl, Bagdogra and Bhubaneswar; and from Mumbai to Ahmedabad, Coimbatore and Kolkata.

The table below shows the domestic dive of Kingisher Airlines over the past few years – a period during which it did hold the position as the number one internal operator by capacity, but now sees it ranked as the seventh largest domestic operator.

The airline had steadily grown in the domestic market and its acquisition of Air Deccan in 2008 and the subsequent formation of the Kingfisher Red brand had lifted it to number one status with a 21.3 per cent share of the domestic capacity in 2009. Since then the freefall has begun as stronger competition from IndiGo and SpiceJet has resulted in a reduction in availability. In 2010 Kingfisher’s share of capacity reduced to 16.3 per cent and last year was just 9.9 per cent.

Kingfisher now faces a difficult few weeks as it tries to stabilise its operations and raise the necessary liquidity to keep the airline afloat. However, its brand has been damaged by recent events and public confidence in the venture has been tarnished, perhaps irreversibly. The airline claims that a potential white knight could provide the finances to overcome its problems, but this is thought to be an international organisation and a remedy will not be possible while the Indian Government finalises proposed plans to remove restrictions limiting foreign ownership of local air carriers to just a 49 per cent stake.