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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.

 

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.

  7 February 2013

  Kingfisher - a popular beer brand in India, nothing else

Surely not an airline, ever again, if it gives it up now. The brand that possessed awesome potential to successfully drive a good set of businesses has been now reduced to being merely a popular beer in India and nothing else. To undo a powerful brand is not easy. But the management that flew KFA with very apparent flawed decisions, did so; quite consistently, continuously and for a pretty long time, a feat, I believe, is indeed tough for even a good set of green horn management graduates to accomplish. The jibe is not misplaced, considering the huge public money that has already become bad and the company’s terrible method to fund its awfully passive exploration of a way out, from unpaid staff salaries, in stealth.

 

The game is over and the quarrel has just begun. Expect a lot of entertainment. Loose talks, weird blames and senseless legal arguments and, with the politicians very much in the background, the drama for writing off the wasted debts in the banks’ books can well get bizarre. That will be some fun in exchange for the public money that’s done in the gamble. The bankers, a big set of them, whose negligent actions have drained millions, have already started yelling for the return of their money. Brazenly, they now claim, everything that belongs to Mr. Mallya belongs to them. Like laymen in lending, these experts of safe lending gave off millions against the dubious brand asset called Kingfisher Airlines and now claim to have a charge on the brand Kingfisher. What would you call these bankers - ignorant or innocent? Not to be outdone, managers at the UB Group have vowed to sue the bankers for calling off the loans and talking about their brand - Kingfisher.

 

To me, it appears like ‘Makkalatta’. ‘Makkalatta’ is a Kannada word which means to say ‘Children’s Play’. The business of Kingfisher Airlines has been just that - played out by the UB group management, professional executives in the airline, some invisible management consultants, a the set of banks all owned by the government and of course the state ministry itself along with its associated agencies and all the politicians overseeing it all. Could the children have played it better! I think so!!

 

Kingfisher Airlines, apparently, has lost its feathers and the skin as well working with wrong questions, right from day one. Here are some excerpts from my earlier articles on the company from the series ‘Branding Logic’.

 

From: “Kingfisher Airlines. Cropping Feathers?”

(Published as web exclusive in Business world, 15 August 2005)

... No doubts, airlines biz fits KF fine. The mistake is in fitting the business with the brand. Though the tunes in the press sound much like it the bird seems to be loosing feathers. It is a case of gross mismatch. Low fare or even value proposition defames the brand and the brand by its characteristics can only trouble the finances of the business.

... The critical branding question is: when a powerful brand is extended, should the brand drive the business or the business the brand? As I see it, the bird which is already uncomfortable, would deliver only on its terms. It has already forced KAL to shift from low fare to value pricing. The conflict would continue. The result is predictable. Eventually, the bird would drive the business in its unique style - - for good. Or the business would strive to survive profitably - - hurting the bird also in the process.

... More for more is what would have worked for sure for KAL. 10 - 20% more would only invite the segment that seeks exclusivity and class isolation. Above all, only KF is absolutely suited to serve this segment.

... If KAL would heed to the bird it need only imagine the possibilities. It can do a lot many things IA and Jet can’t. It can offer all frills and more. The team at KAL need only draw inspiration from the brand. The ideas would spring and flow.

... I believe, KAL needs to recast its strategies all over once to make a profitable sense of this extension. Alternatively, it may rename itself as UB Air and try its misplaced strategies fighting everyone out there. It will save the bird as well. 

From: Mating Kingfisher

(Published in Business World, 24 Nov 2007) 

... Solutions to business problems can surely come from hearing out the brand commands but seeking it by changing the fundamentals of the brand beyond its intrinsic scope can only render the business without the prime source of long-term direction thereby cutting its chances in the market rather drastically.

... I believe Kingfisher, despite the branding mistakes, remains even today immensely potential, many times more than the Jet to lead in the full-service segment. Brands that attain certain stature happen to be resilient to be harmed by quite a bit of undoing.

... But, that's past. And, even powerful brands can face the prospect of quick loss of equity if tried illogically.

... The loss, mostly in terms of opportunity cost, in the misplaced opportunity would be very small compared to the loss in its brand equity - in making good from opportunities that can possibly belong to it.

 

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 against brands.

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 business.

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 the guilt.

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 competence.

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 hard.

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 decade.

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 success.

I believe the way out for Kingfisher is to sing; Ooo la la laa - masterly and daringly. I mean no pun in saying that.

 

Adve Srinivasa Bhat

Management Consultant

 
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