The fact that two of the listed airline firms — budget carrier SpiceJet Ltd and Jet Airways — reported net profits in the December quarter even as his firm widened its loss during the same period has rattled owner of Kingfisher Airlines Vijay Mallya enough to rope in US consultancy firm Seabury Aviation and Aerospace to chalk out its flight path to profitability.
The company is now single-mindedly moving ahead to turn around its business on the back of a reviving domestic market.
But, this is not the first time that the airline has brought in experts to help it reorganise its operations. Four years ago, the airline had formed International Advisory Board to “advice” the airline on its business.
“This board was formed to look and advice into the workings of the airlines and ensure that the carrier met with international standards,” revealed an aviation consultant on the condition of anonymity.
He said while the agenda was to help the airline with its business, the board did not really advice it on its operations. This time around, Mallya is hoping for a complete recast of its operations.
Kingfisher Airlines spokesperson confirmed this; “Seabury has been hired to come in and assist us in sustaining long-term profitability by further strengthening the operational and financial performance of the company so that we are well poised to ride the upturn and capitalise on this opportunity using the best global practices.”
How much of a difference will the advisory firm make to the airline and what remedies should it look at to fly to profit?
Kapil Kaul, CEO, South Asia at Centre of Asia Pacific Aviation (CAPA), said the consultants would have to take a different path to profit for Kingfisher, which is buried in huge debts. “The airline’s interest burden is huge. They need to come out with measures to bring down the debt burden and it is very imperative to de-leverage their balance sheet,” said Kaul.
He said another important aspect that the consultants need to do is to reorganise the airline’s management structure and bring in the professionals to run the airline.
“This would be a perfect time for them to restructure their top management and get in the experts,” he said. He, however, warned that unless steps recommended by these experts were taken seriously, it would not be easy for the airline to fly out of the loss zone that the airline has been flying for the last couple of years.
“Results could be good, (but only) if both the airline and Seabury can work together with constant engagement to stabilise growth,” Kaul said.
Another industry expert said the airline should continue with its capacity rationalisation and fleet optimisation. “The airline has been reducing its fleet size, which now stands at 66, as compared to the 68 until December,” he said.
Aviation analysts said the airline should utilise this opportunity to hive off some of its services into different business units to boost revenues. Recently, the airline introduced its cargo services on board its aircraft — Kingfisher Xpress — to help it drive up its revenues. Some analysts are, however, sceptical about Mallya’s initiative. They said while the idea seems to be a rather “effective one”, they doubt whether it can succeed.
“When you look at the other consultants that have been brought to fix the airlines’ operations, they never seem to come in on a common consensus and end up being at loggerheads. One such example is that of the state run Air India, which has been on a consultant hiring spree since its merger with Indian Airlines,” said a senior analyst with a local broking firm.
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