Kingfisher to End Low-Fare Travel Business

Kingfisher Airlines, India’s second largest airline in terms of passenger traffic, has announced to exit the low-cost segment of the market. The strategy adopted by the airline is completely opposite to that of Jet Airways, the market leader.

Kingfisher Airlines announced on Wednesday that it is going to exit the low-cost business model in four months and would instead focus on catering the premium segment. High debt and cut-throat competition has forced the ‘five star airline’ to take the decision that has left many wondering.

Vijay Mallya, Kingfisher Airlines’ flamboyant chairman, made this announcement on the sidelines of the airline’s shareholder meeting. He said that different measures that have been initiated to counter the financial problems caused by augmenting interest burden and rapidly escalating fuel costs.

“We are doing away with Kingfisher Red because we do not intend to compete in the low-cost segment,” Mr Mallya was quoted as stating in different Indian news portals.

“We believe that there are more than enough guests who prefer to travel the full service Kingfisher class and that shows through in our own performance where load factors in the Kingfisher class are more than Kingfisher Red,” he said.

Indian as well many global travellers who prefer cheap flights to India may not exactly take a liking to this bit of announcement as Kingfisher Red was popular choice for travel within India among budget travellers who go for cheap flight tickets.

Kingfisher came onto the Indian aviation scene in 2005 as a full-service airline. In 2008, the airline took over the Air Deccan and formed a low-cost subsidiary offering cheap tickets on domestic flights. And now, after three years, it has been announced that the budget airline will be been scrapped.

“Clearly the margins of Kingfisher Class are better than Kingfisher Red as the yields are better”, Vijay Mallya stated. He also said that the reconfiguration of aircraft has started and it should be completed over the period of next four months.

Kingfisher later issued a statement that said cabin reconfiguration “which will add significant number of seats and, hence, generate additional revenue at minimal cost.”

“All of Kingfisher’s Airbus aircraft will have a first class with incremental seats in economy. At this time Kingfisher will be dropping the Kingfisher Red class of service. This effort will be concluded in the next four months,” the statement further read.

Kingfisher Going Against Market Trend

The announcement of Kingfisher’s exit from low-cost flying has taken many by surprise as at this point of time budget operations are the biggest revenue earners for most of the Indian carriers.

Kingfisher’s strategy seems to differ completely from Jet Airways, country’s market leader in terms of passenger traffic. Recently, Jet Airways announced its plans to increase the ratio of its low-cost flights, from 72% to 85-95% in the next five years. Three out every four tickets sold by Jet Airways is believed to be on the low-cost flight section.