Kingfisher Airlines Case Study

KINGFISER AIRLINES : A CASE STUDY
I stand today in the skeletal remnants of a game changing and trend setting carrier that during its hey days connected 72 centers through 420 daily flights on 77 aircrafts. –Vijay Mallya
(source: http://theubgroup.com/ubprofile_UBHL.aspx)
INTRODUCTION:
Kingfisher airlines limited was established by the United Breweries group of Vijay Mallya in 2003 but commenced operations on 9th May 2005 on Mumbai to Delhi route with a fleet size of 4 A320’s(source : http://en.wikipedia.org/wiki/Kingfisher_Airlines).It merged with another Low cost airlines named Air Deccan in 2007 which was already in the aviation market long before kingfisher was established thus enabling it to connect to international routes on 3rd September 2008 by connecting Bengaluru to London.
A short introduction to Aviation sector when Kingfisher entered :
When Kingfisher airline commenced operations as a full service carrier while the aviation sector was comprised and dominated by many Low cost carriers (LCC’s) like Air Deccan, spice jet, Go air and a year later another LCC joined the industry i.e Indigo airlines which is now one of most profitable airlines in India.
Challenges faced by new entrants:
1. High Cost of entry:
The industry is heavily saturated with many leading companies. Moreover, the investments to be made like buying/leasing aircrafts, providing customer service and taking security measures are very high. Further a lot of advertisements and promotions have to be done in order to make a brand familiar in the society.
2. Heavy competition
Because of many LCCs and Indian Railways in the market people usually go with an airline/train offering lowest price and considerably good services depending on the time that ...

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...-1.96

ICR signifies the ability of a firm to meet interest expenses. In the year 2009 all the three airlines had negative ICR which means that their EBIT was negative during that period i.e ICR was effectively zero.
2009 was a period of recession and hence the net sales dropped and so did the EBIT. But overall Jet Airways has a better position than Kingfisher and SpiceJet.

Profitability Ratio:
1. Operating Expenses Ratio:

Company 2013 2012 2011 2010 2009
Jet Airways 0.20 0.190105 0.199643 0.215586 0.205662
Kingfisher airlines 2.05 0.363718 0.322665 0.437136 0.439981

Jet Airways has maintained its operating expenses to about 30% of its net sales. But Kingfishers expenses had drastically increased from around 40% to 190% i.e its sales have went down to such an extent that it couldn’t even meet its operating expense at the time when it was about to shut down.