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What the Indian media will not tell you about Kingfisher Red

September 28, 2011

So Kingfisher has decided to ground its low-cost airline, Kingfisher Red. Here’s what the Indian media will not tell you.

There was a rule that if your airline is less than five years old it could not be allowed to fly international. This was ridiculous: an upstart airline could fly from Delhi to Chennai but not Chennai to Colombo. There was method in the madness. The rule was to prevent Jet Airways from newbie competition. The people who ran civil aviation had a problem. Having made this rule, they had to find a way around them to let Vijay Mallya enjoy his good times.

Here’s how it was done. Kingfisher bough Air Deccan, whose owner later regretted selling out when he saw how Air Deccan was being destroyed under its changed name, Kingfisher Red. Now that Kingfisher had bought over an airline that was over five years old, it demanded to be allowed to fly international. The permission was given. Except it wasn’t the low-cost Kingfisher Red flying abroad. It was the high-cost Kingfisher. Good times had begun.

Purpose solved, hungama over, Praful Patel taken out of civil aviation, his ruining of Air India to benefit Kingfisher and Jet exposed… Kingfisher Red is shutting down. Bye, bye.

If low-cost airlines are not viable, why was Praful Patel and the entire civil aviation ‘sector’ promising us good times, and why aren’t the other low-cost airlines shutting shop.

Capitalism 101 says if a business is not viable it should die. Apparently that doesn’t apply to the civil aviation sector in India.

Back then, 2008-ish, I remember discussing all of this in an edit meeting. I was cut short. “Praful Patel is said to be an honest minister,” the editor said. That was that.

Such is the ‘economic growth’ that is ‘trickling down’ and bring millions of Indians out of poverty. I don’t understand economics. Thank god for that.

16 Comments leave one →
  1. September 28, 2011 6:40 PM

    How can the airlines be allowed to charge higher than the normal rates? I can understand their giving concession and cutting rates to benefit or which will also benefit passengers but how can they exorbitantly rack up rates like medieval moneylenders? Recently due to agitation in Telangana all road and rail travel was stopped and then Group I exams are going on in Hyderabad as per schedule. Taking this as golden occasion the airlines are reported to have charged anywhere between 12 to 15 thousand rupees for a ticket from Vizag to Hyderabad to the anxious and needy candidates. How can this money-making spree be allowed? There should be some line which cannot be crossed. I had 6 years ago flew to Delhi from Hyderabad for Rs 5000/- or so. So there should be one standard rate, say Rs. 3 thousand from Vizag to Hyderabad, Rs. 3 or 4 thousand from Madras to Hyderabad, etc. which should under no circumstances be crossed. There should be some Airways Regulatory Authority for such price fixation also. Like the Regulatory authority for electricity rates, etc.

  2. September 28, 2011 7:06 PM

    Just that that Air India has had nothing really left to ruin anymore since the wonderful nationalization by Indira Gandhi in the 70s.
    What we see here is crony capitalism.

  3. September 28, 2011 10:24 PM

    Govt destroyed BSNL/AirIndia to promote/profit private operators viz Forward caste.

    • Praveen permalink
      September 29, 2011 12:31 PM

      BSNL was being sucked by its huge size lazy employees but not by govt. It’s paying 50% of its revenues as salaries to its employees., then where can it get money for upgradation???? Even the so called high paid IT companies too pays only 40% of their revenues as salaries to employees.

    • Peter permalink
      October 5, 2011 8:59 PM

      In front of money, does forward or backward cast matter? A Raja, part of biggest scam discovered in the history of India, is a Dalit!!

      You need to free your mind of such biases.

  4. September 28, 2011 10:29 PM

    Excellent insight. I could see that the daal is kaali.

  5. September 29, 2011 12:34 AM

    but the thing is, kingfisher red existed along side with the high cost kingfisher that flew international… so exactly why this random “shut down”.. it does seem fishy. i too do not understand economics & how it works alongside the politics of money.

  6. September 29, 2011 3:18 AM

    It is telling! It tells about the minister himself who added Rs. 5 Lakh a day in the last 28 months.

    Who gives a damn about Air India? Personally “Fly the Good Times” is everyone’s motto now.

    Where does the buck stop?

  7. Sampath permalink
    September 29, 2011 10:16 AM

    What you are saying is nothing new…it has been reported time and again..even today…read this…
    http://www.dnaindia.com/analysis/comment_after-foxing-move-vijay-mallya-may-cut-fleet_1592830

  8. September 29, 2011 11:53 AM

    whats the noise about. This analysis is totally stupid, just one side of the coin. Air deccan did not give you anything for free not even water, not even seat reservation and recently jetlite and indigo are moving to same model. Kingfisher gave you all that at a lower price, crew was the same as kingfisher regular so no return of investment by charging low fare!

    Don’t you get the simple logic! I think mallya should have scaled down operation like indigo, scale down standard services even then ppl would have complained, its his company let it be, the crew doesn’t lose jobs they move to regular kingfisher that what matters. Same thing is going to be with Jetlite aka Sahara is being shut down and only Jet and Jet konnect will be seen in future. Indigo made 2.6 % profit last year cuz of there lowly operation model. Kingfisher as brand cannot do it with the overheads. I think regular kingfisher was way better and made more sense.

    anyways airline business does not make a lot of profit its a very volatile market dependent business. As far as AI go, they need to overhaul the whole management and fire some useless staff and kill quota to compete with private airlines.

  9. September 29, 2011 1:01 PM

    and this is why we need a better media.. thanks a lot to kafila for bringing such articles

  10. suresh permalink
    September 29, 2011 3:49 PM

    If I understand you rightly, you seem to be saying the following. One, there is a cosy and corrupt relationship between certain private sector firms and government ministers. Two, the responsibility for this lies in set of policies initiated in 1991.

    Your first point is valid but not the second. For instance, Dhirubhai Ambani’s rise in the 1980s — well before 1991 — lay in his proximity to the government. This is no big secret. My father, a former bureaucrat himself, told me how in one instance, a policy was changed to allow Reliance to import some machinery without tariff. The policy was changed back as soon as Reliance had imported the machinery!

    Many retired bureaucrats have been hired by private sector companies and this has been going on for a long time. This is not due to their managerial or technical skills but rather for their proximity to those still in government. The idea is to use this proximity to influence policy. My father, on retiring, received a number of such job offers. He refused them all because he knew exactly what they entailed.

    Can we eliminate this unethical relationship between the private sector and the government? If the experience of other market economies is anything to go by, probably not entirely. A part of the problem is that politicians need money to fight elections and typically firms contribute to parties. In India, there is no proper accounting of such contributions. Prem Shankar Jha, in a recent Tehelka article, suggests state funding of elections to eliminate this problem. That, however, might introduce other problems. In general, I don’t think there is a “solution” but we can reduce the scale of the problem by making the operations of the government and sources of funding of political parties more transparent. We don’t need to imitate the USA but we can learn from their experience in this regard.

    You could, of course, argue for a socialist state where all production is in the hands of the public sector. That would eliminate the problem to which you allude but it would surely introduce other problems; the sort of problems which led to the collapse of the Soviet state and caused China to change track in the 1970s. I would not favour such a move.

    We all want a utopia. Unfortunately, there isn’t one. The set of policies initiated in 1991 basically exchanged one set of problems for another. On balance, I think we are better off for those policies, though of course, things could be better. I suppose you disagree. As they say, let us agree to disagree.

  11. September 29, 2011 6:00 PM

    @ Suresh has rightly said that there exists a unholy nexus between certain Companies & certain tainted ministers. I have not put capital letter’s in minister’s because they are not fit . Despite that the irregularties GOI does not fire them. It is our fault too because we Elect them.

  12. Pilot permalink
    October 1, 2011 4:08 PM

    While the broad point is correct (albeit already widely known contrary to the author’s claims) the article shows some gaps in logic.

    (1) To suggest that the thriving of other low cost airlines means that Kingfisher Red should be considered viable is simplistic. Some companies do things better than others, and it is no surprise that a lifestyle oriented airline (Kingfisher) does low-cost poorly. Apple’s success doesn’t mean that Blackberry will sell.

    (2) Capitalism 101 says businesses should die. And Air Deccan/Kingfisher Red has died. Paramount Airlines, ModiLuft, East West Airlines (including its MD), MDLR Airlines and Air Sahara died. And insh’allah so will Kingfisher the way its debts are dragging down United Breweries.

    You are absolutely right when you say “I don’t understand economics.”

  13. Alok Shukla permalink
    October 2, 2011 4:04 PM

    Your analysis makes little sense to me, I would assume that Kingfisher should have not entered low cost airline because never in the world these two areas are straddled together. This is irrespective of whether Praful Patel was corrupt or not. Let us not look for conspiracy theories in these business decisions.

  14. October 3, 2011 11:18 PM

    This was ridiculous..
    True. That is also true about any government controls. When will the ‘progressives’ grow up?

    Capitalism 101 says if a business is not viable it should die. Apparently that doesn’t apply to the civil aviation sector in India.
    Again true. Air India, which has an accumulated loss of Rs 20,320 crores and loans and dues to the tune of Rs 67,520 Crores is not going to die any time soon. More tax payer rupees are going to be thrown into this bottom less pit. Ditto about BSNL and other public sector ‘enterprises’.

    his ruining of Air India to benefit Kingfisher and Jet exposed..
    Can’t say how many times one hears this line in a day that the good public sector is destroyed for the benefit of the rapacious capitalists. Those halcyon days when the public sector was efficient, customer friendly, profitable etc. etc. Anybody who has lived in India for more than a couple of days in that golden era knows the truth. But hey, why should anybody expect ideologues to see the light?

    The unfair competition from tax payer funded (involuntarily of course), losses-no-problem ‘public sector enterprises’ coupled with punitive tariffs and duties have killed the civil aviation sector. Who’s next in line? Telecom? Maybe.

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