India-based Airlines - Kingfisher Has found an investor! Or have they....

http://profit.ndtv.com/News/Article/kingfisher-airlines-potential-buyer-offers-rs-300-crore-for-24-9--299446
Pradeep Bhavnani, a Mumbai-based stock broker and businessman, has offered to pick up a 24.9 per cent stake in Kingfisher Airlines for Rs 300 crore.
Bhavnani told NDTV that he met with Kingfisher-promoter Vijay Mallya and made the offer.
However, the airline refuted any such meeting. “Vijay Mallya doesn’t know anybody by the name of Pradeep Bhavnani,” a Kingfisher spokesperson said.

...

Stock price up 1.5%

http://profit.ndtv.com/News/Article/kingfisher-airlines-potential-buyer-offers-rs-300-crore-for-24-9--299446

- A stockbroker offers to purchase stake and the stock appreciates 1.5%
- Mallya denies (not a "no comment" but a denial) knowing the person
- Quick google search reveals that Pradeep Bhavnani claims to be a man of "Gandhian Principles who has previously tried to outbid Vijay Mallya at an auction for some of Gandhi's belongings"

Surely there's more to it than meets the eye.

OTOH, even if this were a genuine investor, if/while the people running the show remain the same, this will merely delay the inevitable demise of Kingfisher.

I though KINGFISHER house was Hypothecated so how can he sell it in first place to this so called investor?

Oh, there's no doubt that this story is absolutely ridiculous. It is more of a commentary on the media's coverage of the situation, rather than anything else....

40 updates a day on utterly irrelevant information...

When I read this article, my reaction was
http://t1.gstatic.com/images?q=tbn:ANd9GcS1AT423okG6bp3bejAk9pfrk4q57zPa fabsu4svAuqlrARNXoZMurTrllVCw

OTOH, even if this were a genuine investor, if/while the people running the show remain the same, this will merely delay the inevitable demise of Kingfisher.

I agree completely. Flawed business model + poor implementation (due to mismanagement) = bankruptcy

Unless those things change, Kingfisher isn't going to be getting into the black anytime soon

I though KINGFISHER house was Hypothecated so how can he sell it in first place to this so called investor?
I think I follow you on twitter - I read the same comment, pretty much word for word, earlier today...

I agree completely. Flawed business model + poor implementation (due to mismanagement) = bankruptcy


Also otherwise known as what would happen to Air India if it weren't for the GoI's deep pockets.

As an aside, whats with the "estimated reading time for this article" line on your blogs? Seems mildly condescending to the reader if you ask me.

Also otherwise known as what would happen to Air India if it weren't for the GoI's deep pockets. Indeed.

AI has a solid business model compared to IT, but they would never be able to get away with the kind of mismanagement they have dealt with in the private sector...

As an aside, whats with the "estimated reading time for this article" line on your blogs? Seems mildly condescending to the reader if you ask me.
It's an option, which I happen to have enabled. I wasn't sure whether it would be popular or unpopular, so I figured it would be best to put it up and see what people think...
If you think that it would be better turned off, then I'll do it later today... *shrug*
Don't want to drive away readers ;)

Also otherwise known as what would happen to Air India if it weren't for the GoI's deep pockets.

Rephrase / correction : .... if it weren't for taxpayer helplessness.


AI has a solid business model compared to IT, but they would never be able to get away with the kind of mismanagement they have dealt with in the private sector...
Is that right? Really? Because that would imply AI executives have collectively and individually always been beaux idéals when it comes to management.

I suppose then that's another fact?

That cat still hasn't stopped laughing, by the way.

Rephrase / correction : .... if it weren't for taxpayer helplessness.

That is more accurate, yeah...

If GoI truly had deep pockets, they wouldn't be cutting their budget right now... It's truly a sad state of affairs when defense spending is cut before AI's funding.

AI has a solid business model compared to IT, but they would never be able to get away with the kind of mismanagement they have dealt with in the private sector...


What does that mean? Is it like being the tallest of the pygmies? Does that mean that AI's model is made out of straw rather than feathers (relative solidity but poor in absolute terms)?

AI has relied on Government subsidies and hand-outs since time immemorial. If they really have a 'solid business model' it would mean until the recent advent of competition and IC being subsumed into it, that:

- being the sole Indian provider of International air services would be unprofitable whoever ran it
- leaving aside the point above, it was still necessary to have a staff to aircraft ratio several fold higher than airlines who turned a profit and close to the many European basket cases who again relied on the state

to name but a few.

Even after AI took over IC and both Jet and Kingfisher competed with them internationally with many others domestically, if their business model was solid then it would have reacted to the new competition rather than plodding along in it's loss-making way.

The only difference between IT and AI is that the latter has the protection of being propped up by the state.

The only difference between IT and AI is that the latter has the protection of being propped up by the state.

I didn't say that the implementation of the business model has been solid. The mismanagement of AI has been woeful....

My point is that unlike IT, AI actually serves a market in which it is possible for an airline to make money. Kingfisher was a market leader in RASM. But in order to be able to command that RASM, they also had the highest CASM in the industry.

In 2010, IT had a 7.4 cent RASM. That's pretty good. The problem is that in order to get that 7.4 cent RASM, they needed to spend 10.1 cents on their CASM. And that's a major problem.

Compare with 9W - they have a 7.2 cent RASM. Not quite as good. But they only spend 7.1 cents on their CASM. That .1 cent difference is their profitability...

To add to IT's problems, the market they were aiming for, the very top of the market, is small in India. In order to expand, they needed to bring prices lower than they needed to break even. Without bringing prices lower, they wouldn't be able to fill their planes...

Deciding to buy an LCC to try to tap the LCC market was also a bad move. It created a muddled brand, diluted their product, and brought up the CASM of their Kingfisher Red operation to unsustainable levels.

That is a poor business model - no matter how well the airline is managed, the market isn't there, so they can't make money.



AI on the other hand doesn't make money either. This is thanks to mismanagement, government interference, and labor tearing the airline apart. But it has a much saner business model.

It isn't an ultra-upscale airline - the Indian market cannot handle that. It is a full service carrier, which provides the frills that the FSC part of the Indian market can afford. If it was managed properly, it would make money...

In the end, it's all irrelevant though - it's the mismanagement which killed IT, and probably should have killed AI. Business model is secondary.

Hang on. AI has a business model besides flying completely absurd routes some drone at the Civ Av Ministry thought would be a good idea, while withdrawing from other money making routes in a move that would make absolutely no business sense?

Hang on. AI has a business model besides flying completely absurd routes some drone at the Civ Av Ministry thought would be a good idea, while withdrawing from other money making routes in a move that would make absolutely no business sense?

That is mismanagement, not a flawed business model :)

You could say that AI's business model is mismanagement and I'd understand where you are coming from.. But that's not what I was talking about when I made the original statement.

AI has a solid business model compared to IT

andhon mein kaana raaja (in the land of the blind, the one – eyed man is king)....

That is mismanagement, not a flawed business model :)

You could say that AI's business model is mismanagement and I'd understand where you are coming from.. But that's not what I was talking about when I made the original statement.

So what is, AI's business model?

andhon mein kaana raaja (in the land of the blind, the one – eyed man is king)....

bahut khoob...

andhon mein kaana raaja (in the land of the blind, the one – eyed man is king)....

absolutely :)

So what is, AI's business model?
This hinted at it:

AI on the other hand doesn't make money either. This is thanks to mismanagement, government interference, and labor tearing the airline apart. But it has a much saner business model.

It isn't an ultra-upscale airline - the Indian market cannot handle that. It is a full service carrier, which provides the frills that the FSC part of the Indian market can afford. If it was managed properly, it would make money...

In the end, it's all irrelevant though - it's the mismanagement which killed IT, and probably should have killed AI. Business model is secondary.

Basically, it is a very simple business model. A normal full service carrier, selling tickets for full service rates, serving routes with full service demand.

There's no "ego" behind it, trying to make it the "best in the world" (in his view), at rates which the majority of the flying public cannot afford.

In fact, I'd go as far as to say that they've even managed to differentiate their product in terms of their food....


On the other hand, they seem to have differentiated the airline as one that you can't trust when things go sideways. When things are good, AI is a great carrier. But when IRROPS occur, they can be a nightmare...

Not always - sometimes they've handled IRROPS very well. But there always seems to be that high profile incident in the news which destroys their image - and AI seems to have no mechanism in place for damage control. If they did a better job telling their side of the story to the press, and if they took better care of their passengers in these issues, they would be better off.
But they aren't proactive like you can expect from a more reliable carrier...

Basically, it is a very simple business model. A normal full service carrier, selling tickets for full service rates, serving routes with full service demand.


There is no such thing as a "very simple business model".

And AI's flirtation with AI Express, including turning some hitherto money making routes (to and from the middle east) to its low cost subsidiary would suggest that it is anything but a normal full service carrier.

They haven't got an rational growth plan. Their idea of achieving a favorable staff to aircraft ratio is not to shed its bloated staff numbers but to add more aircraft.

Some of the routes AI flies (or plans to fly) have more than a hint of ego, absurdity (politics?) and sheer confusion to it. Flying to three airports within UAE (all within miles of each other); split focus in New York (JFK and EWR) and this harebrained flight (proposed) to MEL to name a few.

And AI's flirtation with AI Express, including turning some hitherto money making routes (to and from the middle east) to its low cost subsidiary would suggest that it is anything but a normal full service carrier. Quite contrary, if there is any part of AI which I would call a success story, it would be IX.

The routes from southwest India to the gulf are mostly full of migrant workers visiting their families back home. They are looking for point to point LCC service. That's what IX is providing

They haven't got an rational growth plan. Their idea of achieving a favorable staff to aircraft ratio is not to shed its bloated staff numbers but to add more aircraft. It would be political suicide to shed staff. As long as AI is owned by the government, it would be ridiculous to expect them to lay off anyone...
Should they be trying to get their staff costs into line? Hell yes. But it's not going to happen

Some of the routes AI flies (or plans to fly) have more than a hint of ego, absurdity (politics?) and sheer confusion to it. Flying to three airports within UAE (all within miles of each other); split focus in New York (JFK and EWR) and this harebrained flight (proposed) to MEL to name a few.
Agreed.

It would be political suicide to shed staff. As long as AI is owned by the government, it would be ridiculous to expect them to lay off anyone...
Should they be trying to get their staff costs into line? Hell yes. But it's not going to happen


And how do they get their staff costs into line without shedding them?

And if they don't get their costs into line, then how do they attain profitability?

And if they don't attain profitability then how do they stop churning through taxpayer money?

And if they don't being a bottomless pit for the taxpayer funds then when does the Government say "enough is enough" and cut them loose?

And if it is going to end in the Government cutting them loose, then why not do it now than dancing the dance and throwing good money after bad for years to come?




And how's that "business plan" looking now?

And how do they get their staff costs into line without shedding them?

And if they don't get their costs into line, then how do they attain profitability?

And if they don't attain profitability then how do they stop churning through taxpayer money?

And if they don't being a bottomless pit for the taxpayer funds then when does the Government say "enough is enough" and cut them loose?

And if it is going to end in the Government cutting them loose, then why not do it now than dancing the dance and throwing good money after bad for years to come?

And how's that "business plan" looking now?

Pretty poor :)

But better than IT's

As Keyser said so wisely:
andhon mein kaana raaja (in the land of the blind, the one – eyed man is king)....

Pretty poor :)
But better than IT's


Actually, its nowhere near being better than IT's

If it weren't for GoI's pockets, AI would've folded long ago.

And if it weren't for GoI's "dog in the manger" act, none of the three alliances would've touched AI with a barge pole.

Actually, its nowhere near being better than IT's

If it weren't for GoI's pockets, AI would've folded long ago.

And if it weren't for GoI's "dog in the manger" act, none of the three alliances would've touched AI with a barge pole.

The basic principle behind AI is better than the basic principle behind IT. Both have made a hash out of the implementation, and if you look at financials, both deserve to fold. For that matter, 9W hasn't quite done the best job either..

The basic principle behind AI is better than the basic principle behind IT.
Can you explain this? It seems to me like both AI and IT employed similar strategies: both were full service carriers that entered into the low-cost business in the last few years (by launching IX and by purchasing Air Deccan respectively).

Can you explain this? It seems to me like both AI and IT employed similar strategies: both were full service carriers that entered into the low-cost business in the last few years (by launching IX and by purchasing Air Deccan respectively).

Sure :)

Firstly it is important to keep in mind that there is a significant difference between AI/IX and IT/DN.

IX was launched to serve a very specific target demographic (migrant workers in the Gulf). It's branding is completely different than AI. When you are on an AI flight, you know that you will be getting a full service flight.

When you fly on IX, you know that it's an LCC. Interestingly, IX still serves meals - that's an important product differentiator for the AI group. But otherwise, IX is an LCC. It flies from the LCC terminal at airports which have them. It is advertised as an LCC.

There is no branding mush between AI and IX. There is a clear place for each of them, and that place is clear in the mind of the customer.

IT/DN on the other hand is a completely different situation. DN and IT merged, because that was required for the 5 year requirement to be fulfilled. That means that if you are flying on an IT flight, it isn't immediately clear if the flight is full service or LCC service. After all, it is the same airline...

Along with the merger, IT and DN together moved towards the middle of the spectrum - it became hard to tell where IT (LCC) ended and IT (FSC) began. The costs for DN, which were competitive with other LCCs, were brought up closer to IT levels. This made it unsustainable as an LCC.

9W actually faces similar problems as well. The difference between 9W and S2 is clear. That is one thing which they did well. But the difference between 9W and 9Wk dilutes the brand...

IT's problem is that their original, ego-driven, target demographic was too small. There just aren't enough passengers willing to pay a premium to fly a very tippy-top of the market carrier in the price sensitive market that is India. So they decided to launch an LCC and try to capture the lower end of the market as well. A foolish idea from the start. If they had brought DN up to IT standards, then they wouldn't have dealt with brand dilution. But then they would have dealt with a completely new problem - too many planes, and not enough passengers willing to fly on them. Overall, the whole DN merger was a terrible idea.

AI on the other hand didn't go for the very tippy-top of the market. They are a mid-market carrier (compared to other FSCs). They have yields that reflect this. In theory, they should have a cost base that reflects this. Obviously, that isn't true with gov't interference, labor, etc. However, the idea behind AI is one which could be implemented profitably if done properly.

As for IX, it is a relative success story - it is a new carrier, so it has a much lower cost base than AI. It has a clear target market, which it serves with a product which the target market appreciates and can afford.

Pretty poor :)

But better than IT's

As Keyser said so wisely:

Actually, its nowhere near being better than IT's

If it weren't for GoI's pockets, AI would've folded long ago.

And if it weren't for GoI's "dog in the manger" act, none of the three alliances would've touched AI with a barge pole.

I've been away for a few hours and the points that I wanted to make in response have been made so there is no need to rehash them.

PVDtoDEL, your point about AI's business model appear to come to this:

AI is a Soldier who constantly runs out in to a war zone without any protective equipment. When he's shot at, the best Doctors scurry round and keep him alive. He knows that will happen and prevent those Doctors from helping others but he continues to act foolishly.

IT is a Soldier who equally runs around without protection but when he gets shot at, the Doctors refuse to treat him.

AI then has the temerity to shout and laugh at IT, calling him irresponsible and foolish.

AI then has the temerity to shout and laugh at IT, calling him irresponsible and foolish.

hilarious....:D

I've been away for a few hours and the points that I wanted to make in response have been made so there is no need to rehash them.

PVDtoDEL, your point about AI's business model appear to come to this:

AI is a Soldier who constantly runs out in to a war zone without any protective equipment. When he's shot at, the best Doctors scurry round and keep him alive. He knows that will happen and prevent those Doctors from helping others but he continues to act foolishly.

IT is a Soldier who equally runs around without protection but when he gets shot at, the Doctors refuse to treat him.

AI then has the temerity to shout and laugh at IT, calling him irresponsible and foolish.

That is not my point. If you read what I actually wrote...

Let me think of a better analogy... How about Mr. Mallya's F1 team?

IT is a crappy driver (poor management) in a crappy car (poor idea behind the airline). He crashes the car before he even finishes the first lap The mechanics refuse to fix his car.

AI is the crappy driver (poor management) in a decent car (good idea behind the airline). He also crashes, because no matter how good the car is, the driver must also be able to drive. The difference is that each time the car crashes, mechanics fix it up and keep it going...

And then I guess AI has the temerity to shout and laugh at Kingfisher, saying "my car is better than yours" ;)

Also, let me just include 9W - 9W is an ok driver - he hasn't crashed yet. Everyone things that he is a brilliant driver because he is racing against the likes of AI and IT. But one day, the way current things are going, he will also crash. Whether the mechanics will fix his car up, or whether he will get replaced by a better driver remains to be seen.

AI is the crappy driver (poor management) in a decent car (good idea behind the airline).

And there is the fault in your analogy.

AI do not have a sound business plan or 'good idea' as you now want to call it. This can be evidenced by the:

- ridiculous losses made year on year
- staff:aircraft ratios that would have a Greek banker scratching his head
- a very poorly yielding First Class cabin that should have been scrapped eons ago
- an inability to enact any change, be it gradual or cataclysmic to avoid the need to go cap in hand to the Government every year

Bu then given that the Indian Government won't say no, why should they? That doesn't make their business plan good, it makes the Government foolish and management lazy.

AI makes money to and from the Gulf which with respect, unless you replaced the planes with buses (a joke about the British Railway system for those wondering) would be impossible not to. They do try and their best not to, but we're back to foolish and lazy again.

And there is the fault in your analogy.

AI do not have a sound business plan or 'good idea' as you now want to call it.

I have made my reasoning for saying that AI has a good idea behind it here:
http://www.flyertalk.com/forum/18183770-post25.html

If you have a specific question/clarification/correction about something that I said, you are free to give it. In fact, I'd like that, since then I'll be able to strengthen (or throw out) my theory...

This can be evidenced by the:

- ridiculous losses made year on year
- staff:aircraft ratios that would have a Greek banker scratching his head
- a very poorly yielding First Class cabin that should have been scrapped eons ago
- an inability to enact any change, be it gradual or cataclysmic to avoid the need to go cap in hand to the Government every year
As I thought I made clear, this is all reflective of the poor driver. Not the fact that the car sucks.

So here's my take on AI vs IT.

Even if AI does have a better business model, it matters little. Why? The best business plan in the world will not excuse poor implementation, government interference, etc. As it stands, both are extremely poorly run and heavily loss making, and the final result is a train wreck of an airline. (or in this case, 2). As far as the car analogy goes, there may have been a good idea behind the car, but the car itself is still poorly manufactured with plenty of unnecessary add-ons and obviously the driver sucks.

So here's my take on AI vs IT.

Even if AI does have a better business model, it matters little. Why? The best business plan in the world will not excuse poor implementation, government interference, etc. As it stands, both are extremely poorly run and heavily loss making, and the final result is a train wreck of an airline. (or in this case, 2). As far as the car analogy goes, there may have been a good idea behind the car, but the car itself is still poorly manufactured with plenty of unnecessary add-ons and obviously the driver sucks.

Well said ^
I agree completely.

Lets take a look at which Airline in India is guilty of

- Disproportionate Cost/Revenue ratio
- Monumentally stupid fleet purchase decisions
- Routings driven by things other than commercial sense
- Hankering to join an alliance without a clear direction of what they'd bring to the alliance and what the alliance will deliver to them

And then we have the AI Groupies who think a business plan which can boast of the aforementioned achievements is somehow "basically sound"; while KingFisher, guilty of the same afflictions is plagued by "bad business model".

:rolleyes:

Lets take a look at which Airline in India is guilty of

- Disproportionate Cost/Revenue ratio
- Monumentally stupid fleet purchase decisions
- Routings driven by things other than commercial sense
- Hankering to join an alliance without a clear direction of what they'd bring to the alliance and what the alliance will deliver to them

And then we have the AI Groupies who think a business plan which can boast of the aforementioned achievements is somehow "basically sound"; while KingFisher, guilty of the same afflictions is plagued by "bad business model".

:rolleyes:
Now now, stop being rational! :D

Now now, stop being rational! :D

on ft that could almost be classified as a crime....:p

Lets take a look at which Airline in India is guilty of

- Disproportionate Cost/Revenue ratio
- Monumentally stupid fleet purchase decisions
- Routings driven by things other than commercial sense
- Hankering to join an alliance without a clear direction of what they'd bring to the alliance and what the alliance will deliver to them

And then we have the AI Groupies who think a business plan which can boast of the aforementioned achievements is somehow "basically sound"; while KingFisher, guilty of the same afflictions is plagued by "bad business model".

:rolleyes:

^