And, UB Group has yet again missed the right question, trying hard
with hopeless ones.
Today, the hapless bankers and arguably
the overbearing ministry will only repeatedly ask Mr. Mallya for a
plan and even slyly push him by saying - ‘You Can’, without a clue, on
the ‘how’ of it. The truth, if at all the management at UB Group would
realize, is that it cannot afford to sell more than 49% of Kingfisher
Airlines, with the current funding structure, for the tremendous value
it has in the brand Kingfisher which remains immense, even today, in
spite of the disastrous affair with the airline business. And, for any
buyer Kingfisher Airlines is worthy, if at all, only for long term
profits and not, not at all, for owning beyond 49%. The related truth,
from the branding perspectives, is that if Brand Kingfisher cannot
help KFA, nothing else and none, not even Mr. Mallya can. As an
enterprise, KFA is stuck with large lumps of wasted debts that can
sink even a rich business house. Foreign companies are a bit too wiser
to buy the debts in the drain in spite of the cheaper rupee.
Ironically, the UB Group must be perplexed now as to how the FDI
permission, which it longed for and in fact pushed hard for, turned
out to be a real threat. The decision opened up the doors for all and
no one who knows the finer aspects of cost and volume balance of
flying in India would be unwise to consider a financial a wreck.
And, the banks in India don’t seem to know a thing about lending
The KFA fiasco also tells that banks in
India are grossly ignorant about lending against brands. KAL (The UB
Group) was just too smart to draw more from banks with a valuation
note from Grant Thornton which valued the brand KFA at Rs.3406 cr.
Brand valuations are ever fuzzy and are highly subjective and often
misunderstood and therefore misused. Often they can be gross nonsense
too, like the way UB Group sold it to ignorant bankers as collateral,
for more money. I don’t undermine that valuation though. I believe,
brand Kingfisher, surely at that point of time, not that it is
downright lesser now, was indeed powerful to substantiate KFA’s
potential perhaps a bit more than that valuation. But brand valuations
are subjective and Grant Thornton valuation only suggested capability
of KFA as a brand to compete and achieve a certain revenue volumes of
certain profitability in the medium to long term and could only have
served as a proposition support for UB Group to negotiate equity
partnerships. Our bankers buying into it only speaks of their lack of
understanding of how brand impacts business and its relative
valuations. KFA’s value as a brand asset, in terms of cash it can
fetch to serve as collateral could have been no more than 20% of that
valuation and with the business failing in a hurry with characteristic
senseless decisions that was only rapidly moving towards ZERO - and
indeed hit zero when the bankers gave cash the last time.
And, the brand kingfisher is still quite powerful in spite of the
big loss of brand equity from this awful affair with the airline
Strong brands don’t die out of a slip with
an extension, however miserable that may be. Any other airline,
including Jet would have been out of sight and mind by now if they had
slipped into the pit KFA has long been in. Air India is an exception
being privileged by the system which lets it to heap up losses without
Brand Kingfisher is highly resilient. It
draws its awesome power from its core product Kingfisher Beer and
being driven by the consumers now UB Group can’t undo it as easily as
it did KFA. In fact, KFA is a typical case of a brand disowning a
business because it is not run in ways that befits its character. Well
it happens. And, KFA will remain a classic example for a long time in
the academic thinking about flawed branding.
And, the brand Kingfisher has lost the power to extend itself into
serious businesses which demands ability to compete with managerial
While the brand equity of Kingfisher
remains intact by its intrinsic values it surely has lost its power to
leverage its values to anything beyond beer and the sexy calendar for
a long, long time. Inability to manage serious businesses in a
competitive situation is a comment UB Group can’t argue to deny in the
face of silly and very apparent errors it has committed with almost
every decision it has taken in flying the airline up and down the
chart. Astonishingly, the group seems to be chewing on its options a
bit too long. Its management of the affairs and the crisis in
appallingly annoying slow motion has put bankers, suppliers and worse
its employees as well on the edge, and flaring. Management
incompetence is a hard to remove blemish brand Kingfisher can’t
wriggle off, for years? And, it sticks to UB Group as well and as
Only Kingfisher can save KFA, if at all.
Kingfisher can. But, can UB Group shore up the resources?
Saving KFA is a simple and hard job. Brand
Kingfisher still has the power and the charm to stand tall among the
airlines in India. Have no doubts about it in spite of the nasty hit
that has only subdued it real potential.
Nonetheless, Kingfisher Airlines as an
enterprise is absolutely rundown with nervous debtors and would need
lots of money to take off again leaving aside the pains of huge wasted
debts. That’s going to be a tough call for the UB Group. To make a
considered decision on that the group needs to carefully and without
bias assess and ensure the power of brand kingfisher to transform KFA
back to being a proactive competitor. A true assessment of brand
kingfisher will open up feasibilities on funding, right on the
strengths of the brand. I think the group needs to think hard on the
long term money in a thriving KFA, if it can be transformed to being
one, and more importantly the fillip and opportunities it can yield
back for the battered brand and therefore to the group as well.
The question is; should the brand Kingfisher save KFA?
Does that make business sense for UB Group?
I believe, Kingfisher badly needs to save
KFA not as much for the debts and long term money in the airline but
essentially for sustaining and enhancing its own brand equity, in the
interest of the group. The loss of brand equity of Kingfisher, in the
event of messy closure of KFA, which necessarily sticks the negative
attribute ‘incompetence to manage in a competitive situation’ will hit
hard on the ability of the group to maneuver growth and expansion of
its existing businesses in the medium term and harder so with worthy
external opportunities. And, that can put the group back by at least a
Looking at it from the branding
perspectives it makes huge sense for the group to think hard in
leveraging its strengths in the current operations and more
objectively the power of brand Kingfisher in flying KFA convincingly
and competitively again and soon.
For the UB Group, here are some hard stipulations it can’t ignore
if it would take the right decision to fly KFA with determination.
KFA has to gain at least 18% of the market
and in about 6 quarters. It surely calls for a very aggressive plan to
creep up quickly and achieve as many daily flights with competitive
operational efficiency as soon as possible. A lesser target would make
the recovery hard, painful and terribly risky. Ghosts from the hard
times will only influence the nervous management against it. But, a
measured play can be suicidal.
Money required to achieve the above target
is huge but is quite critical. Apart from the money needed to achieve
that operation level in terms of nuts and bolts additional money would
be needed for meeting unavoidable cash loss in the first 2 quarters
which could be substantial but happens to be part of essential
investment. This funding should essentially come from the power of
brand Kingfisher and the corporate brand UB Group. Articulation of the
Brand Equity of Kingfisher and making out a convincing proposition out
of them is the task. Funding strategies at this point calls for strong
convictions and abilities to support large genuine brand value and to
be able bargain hard with it.
The recovery hinges on the power of the
brand equity of Kingfisher but effectively using it to compete in the
market ought to be evolved competently. Promotion cost has to be lower
than the competition. And, that calls for real innovations in;
organization, operations and marketing.
Product and operational strategies are the
soft things that provide convincing competitive advantage and greater
feasibility on all tasks that impact revenues and costs. Management
competence ought to be the most essential input. The venture is risky,
not necessarily challenging and therefore calls for aligning
supplementary managerial competence, as medium term input, to ensure
I believe the way out for
Kingfisher is to sing; Ooo la la laa - masterly and daringly.
I mean no pun in saying that.