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12 Dec, 2005

How Being Part of a Beer Empire Can Help a Start-up Airline

KUALA LUMPUR: Thailand’s PBAir and India’s Kingfisher airlines are both offshoots of their countries’ respective beer conglomerates.

But while PBAir acquired the personal initials of the company’s founder, the Indian start-up airline assumed the well-established brand of the beer – and is capitalising big-time on its huge market value.

The brand and the huge marketing and distribution machinery behind it is a critical competitive advantage in India’s liberalised and increasingly cut-throat aviation market, Kingfisher chairman Vijay Mallya told an aviation summit here last week.

Being owned by India’s largest brewery has given Kingfisher a detailed understanding of the Indian consumer, he told the summit organised by the Centre for Asia-Pacific Aviation.

As “every second bottle of booze sold in India comes from United Breweries” (the owning company of Kingfisher), the “constant process of research” plays a critical role in helping it identify specific markets in the major metros.

The UB Group is one of India’s largest conglomerates with a turnover of more than US$ 2 billion from diverse interests in brewing, distilling, real estate, engineering, fertilisers, biotechnology, information technology, publishing and now, aviation.

Kingfisher Airlines, a US$1.8 billion project, is a wholly owned subsidiary of United Breweries (Holdings) Ltd. It began flying in May 2005 and has grown from four flights to 52 flights daily with a fleet of seven A320s and is adding new aircraft at the rate of one a month.

Positioning itself as India’s first “Full Service – True Value” airline, above both the leading private carrier Jet Airways and government-owned Indian Airlines, Kingfisher has introduced a slew of marketing and promotional initiatives “never seen before in Indian aviation history.”

“A consumer does not select a brand in isolation,” says Mr Mallya. Just like the beer, and drawing upon the ‘inspiration’ that he gained from AirAsia founder Tony Fernandes, Mr Mallya is marketing Kingfisher as “Fun, Lifestyle, Trendy” and “more than just a means of getting from here to there.”

Says the marketing pitch, “We are not in the transportation business but in the ‘aviation hospitality’ business. That’s why there are no passengers on Kingfisher Airlines, only ‘guests’. We are not just a company but a movement.”

Referring to the cabin crew as ‘flying models’ goes down very well with India’s primary beer-drinkers, young upwardly mobile males aged 25+, many of whom live in Bangalore, which is both Kingfisher’s home base and India’s fast-growing I.T. city.

Mr Mallya said that in India it is important to know the centres of both economic and ethnic wealth.

“For example, there is a group in India known as the ‘marwaris’. In Kolkata (formerly Calcutta), they are the dominant business community. They come mainly from Rajasthan (whose capital is Jaipur). But nobody is connecting Kolkata to Jaipur, so we will do it.

“Then there are the Gujaratis, also a prominent business community. (They come from Gujarat where the main business city is Ahmedabad.) But nobody connects Kolkata with Ahmedabad, so we will do that too.”

These communities are “pretty adventurous” and like taking their holidays. Goa is one of India’s most popular holiday beach resorts but “nobody is connecting ahmedabad with goa. So we are going to do that, too.”

Said Mr Mallya, “It is this kind of constant thinking out of box that is driving our routes and planning. We know well where we are going to be flying as far ahead as 2007.”

He indicated that there was no shortage of ways to squeeze value out of the brand.

A Partners Program allows other like-minded brands to come in on “the same platform and achieve respective marketing objectives” using multiple consumer touch-points like multiplexes, malls, restaurants, pubs, events etc.

Special promotions have been designed for the frequent flying corporate traveller, and a co-branded credit card launched with the ICICI Bank.

Mr Mallya said the UB Group had also been asked to do a valuation of rival airline Air Sahara as part of a prospective takeover. The valuation has been done “at a price that makes sense to us” and the ball is now in Air Sahara’s court on what to do next.

He said Kingfisher does not expect to make any money this year, and would consider itself lucky to break even next year. He said a new route takes 60 to 90 days to stabilise, and costs are bound to be high when the airline is growing so rapidly and adding both new aircraft and new routes.

Mr Mallya wants to take the airline abroad as soon as possible but is running up against an Indian government regulation that says start-up airlines have to be in business for a minimum of five years before being given international traffic rights.

He says that does not make sense when foreign start-up airlines like Air Arabia which operates out of the United Arab Emirates is given rights to fly to India even though it has not yet been in operation for five years.

A good time-frame would be two years, which will be just in time for the airline to take delivery of two of the giant A380 aircraft that it has ordered with the aim of being the first Indian airline to operate them non-stop to New York.

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