Tough challenge for Mallya

The new Kingfisher, created after the merger with Air-Deccan, however, has some big challenges ahead. While overseeing the integration of the two airlines, the company’s management has to also work out the international strategy of the airlines. This has to be achieved while ensuring that the airline returns to profits soon, the Kingfisher-Air Deccan combine has accumulated losses of about Rs 2,000 crore. This is not an easy task.
The merger is bringing a low-cost airline and a premium full-service carrier under one roof, one management, a first of its kind in global aviation. Established wisdom says that the two airlines ought to be run as separate brands but with a common back end, to exploit the synergies and avoid confusion and cannibalisation.
The Indian aviation industry is expected to end 2007-08 with a loss of over Rs 2,500 crore, following a loss of about Rs 2,200 crore in 2006-07. These losses were largely because of intense competition for market share, which did not allow the high and rising operating costs to be passed on to the consumer.
Consolidation has eliminated the biggest price players, Air-Deccan and Sahara, which are now part of Kingfisher and Jet Airways respectively. The three big players, Air India, Jet and Kingfisher, which now command nearly 90% market share are now more keen on profits than loss-making topline growth.
22/12/07 Economic Times

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Categories: Kingfisher Dec 2007, Simplifly Deccan Dec 2007