In a hard hitting e-mail sent to its 6,000+ employees, Kingfisher Airlines management has admitted to a serious financial crunch and has asked employees to expect delayed salaries and embarrassing situations facing unpaid vendors.
In the mail Executive Vice President Hitesh Patel informs the team
Along with all other airlines, we are in a tight situation regarding finances. You can expect to be in embarrassing situations with our vendors;your salaries may be delayed but never beyond the 7th
Most companies in India either pay salaries on the first of the month while factories typically pay by the 7th of the following month, so one would think this may not be as bad as it is being made out to be, but further just a few lines down the mail, this statement will surely make employees sit up and notice.
Banks have stopped lending to the airlines; the equity markets have lost their earlier sheen. Hence, money is extremely difficult to come by.
There no way on earth any organisation can live on borrowing alone, even government. Quite clearly Kingfisher Airlines is spending far more than it is earning, and having lost some powerful friends in the banking circle, is fast running out of options.
Citing the perfect storm of high fuel costs, a collapsed economy, topped off by the 26/11 Mumbai terror attacks and the H1N1 swine flu pandemic, Mr. Patel indicates the carrier has trimmed its fleet from 89 to 69 aircraft and has converted 75% of its fleet to the low fare Kingfisher Red service to address the growing shift of passengers from full service to value carriers.
This could partly explain why Kingfisher is in financial trouble. A low fare has to be balanced by an equally slim and highly efficient business operation, and Kingfisher’s USP is its flamboyant and full service operations. Right from neatly dressed valets at the drop point to typically four or more gate agents, and expatriate pilots, Kingfisher is a high cost and glamorous operation. Like Air India, Kingfisher is going to have to be merciless in cost cutting and staff lay-off, but will the political friends of the airline permit it?
While championing the fact that Kingfisher is still India’s largest domestic carrier with 25% market share the mail highlights the poor on-time performance (OTP) of Kingfisher, which is having an impact on passenger choice. Glamour is gone, efficiency is the buzz word, and the entire Kingfisher team is being told to shape up.
For obvious reasons, Kingfisher was one of the champions of pushing the government to allow domestic airlines to sell a stake for foreign carriers. The mail goes on to admit this strategy has been dealt a severe blow by the current government
….we had hoped that the Budget would be a path breaking one. One that would let all of us work and finance our operations in the optimum manner. Sadly, this did not happen. The government has embarked on a different focus and you must have noted the fall in Sensex [Bombay Stock Exchange] and FDI [Foreign Direct Investment] with growing concern. I am afraid that we shall have to make our own way through the mine fields with no hope for any support from the policy makers
Quite clearly, Kingfisher is running out of time and employee moral is definitely very low. Will the economy recover in time before Kingfisher runs out of cash? Unfortunately even the Kingfisher management cannot answer this. Employees who would be looking for re-assurance received none.
What does the future hold for us? I cannot answer that nor can anyone else.
but the mail does exhort the Kingfisher team to perform.
It is to secure a successful future for our KFA that we need to don our battle gear. There are two components of that future; One, the Chairman’s absolute commitment to the airline and two; You, individually are an important part of that future. In a sense, our performance, our outlook over the next two months would dictate the shape of that battle. Let this foray be recorded for posterity as Kingfisher Airlines’ finest hour.
Is this the charge that brings Kingfisher back from the edge or the final charge of futile effort? The answer probably lies in the speed with which Kingfisher undertakes and achieves deep cost cutting and a re-jig of the top management.
I was taken aback by the vehemence with the mail goes on to attack the media
The media is also playing its part in making things more gloomy than they are. For our first three years, we were dear to the media. Then, we became the favourite whipping boys of the media. Kingfisher Airlines just could not do any thing right.
I wonder if the management at Kingfisher Airlines has considered that the media is a mirror, and the answer may well be in the mail itself?
I am a strong supporter of Kingfisher Airlines, but reading this mail is making my faith waver. Is it curtains for Kingfisher? Knowing Dr. Mallya, his passion and commitment to the airline, I still vote for the King . . . . . but not with the level of certainty I had a few months ago.
What are your views?