Kingfisher to float low-cost airline, too

MUMBAI: Kingfisher Airlines’ counter attack plan seems to be in place.

If government sources are to be believed, then the “value” airline — chairman Vijay Mallya likes to call his carrier — is planning to float a no-frills subsidiary.

According to sources, the airline has filed an application with regulatory body to start such a carrier.

Besides disclosing that Mallya may register his low-cost subsidiary as Kingfisher Express, sources did not reveal anything further.

But Mallya flatly denied such a move to DNA Money. “I completely deny it. These are speculative rumours without any basis in fact.”

Industry sources view this as a counter move to competitor Jet Airways’ bid to acquire Air Sahara.

As the only serious rival of Jet (analysts do not view third player in the full service airline segment, state-owned Indian, as a threat), the market was expecting Kingfisher to draw up strategy to ensure that Jet did not get monopolistic advantage in the market that would emerge post-Sahara-takeover.

Jet’s market share is expected to shoot up from around 40% to over 50% with the Sahara buyout. The acquisition would also afford Jet immense economies of scale. There are also reports that Jet would hive off a part of its operation after merger with Sahara to set up a low cost arm.

“Kingfisher is already a serious threat to Jet in the full-fare segment. It has weaned away some of Jet’s gold and platinum cardholders with attractive schemes. If the Sahara deal gets through, Jet will have significant lead over Kingfisher, which at present has only 6.2% market share,” says an analyst.

An industry source says Kingfisher could be motivated to enter the low-cost segment to expand rapidly. “While most legacy airlines have passenger load factor close to 50%, low-cost carriers are easily registering over 70% load factor. Airlines also need lower capital to expand in the low cost model,” said an industry player. The low-cost airline operators are viewing these developments with unease even as analysts are wondering whether the two diverse airline business models can actually work under the same roof.

“This is absolutely absurd. It is being done by troubled players in a troubled market. These are confused bunch of people, who are resorting to such a strategy,” says N M Rothschild & Sons (India) Pvt Ltd assistant director Amitabh Malhotra.

Globally, almost no bids of full service carriers to operate low cost airlines have worked. On the one hand, we have the example of Buzz, the UK-based, low-cost arm of Dutch airline KLM, and British Airways-owned Go, which had to eventually be taken over by EasyJet and Ryanair respectively to keep them afloat.

On the other, we have the recent cases of low cost airlines like Quantas’ Jetstar Asia and Singapore Airline’s Tiger Airways, which have yet to pass the test of time.