ABTN: The rumour is you started the airline to get around India”s prohibition on advertising beer. Is this true?
V Mallya: No, it isn”t. Our job in United Breweries Group is consumer acquisition and retention. For that to work you first need to understand the Indian customer, which is a very young demographic. The future of India shouldn”t be measured only in numbers, but also in the demographic of those numbers. There are 400 million people under the age of 18, and each year, two million graduates, many of whom get good jobs and are paid better than I was at their age. They are also far more western-orientated in their lifestyle, they have a choice of 100 channels on the television and they are very aspirational in their lifestyles, many want to live like the kids in the west.
Now we know their habits will change as they grow older, so it”s an evolving consumer, and we at the UB group have taken great pride in following these evolving trends, whether it”s for a range of sprit products or our beer. Since alcohol advertising has remained banned for several decades I couldn”t say Kingfisher was a beer, so instead I said it was a lifestyle. We have clothing, music, sponsored fashion shows, went into sports and now have a football team.
So when it came to the airline, we decided to design the airline as a consumer product, not as a method of travel. Kingfisher was therefore built something that embodies a lifestyle which is timeless, universally applicable, and everyone seeks a better one. We looked at other names for the airline: UB Air, for instance, but Kingfisher was the overwhelming choice.
Why start an airline?
With recent oil prices reaching unprecedented levels everyone is complaining how difficult conditions are, but we see things from a different perspective. We have a robust economy and a population of 1.2 billion people, with a middle class of 300 million people which will grow to 400 million by 2010, the equivalent to the whole of Europe or the U.S, so there is no shortage of customers.
We at UB have been in this for longer than many realise. The liberalisation of India”s economy started in 1990 and it was in that year that it was announced (prior to legislation being passed), that the monopoly of government for aviation would be lifted. The first private carrier was our”s: UB Air, but when the government failed to repeal the Air Corporation Act, we couldn”t carry on.
Yet India is a vast country in geographical terms, and there are few alternatives to air travel. Travel is an integral part of economic growth yet you can”t use road and rail as a substitute. From Bombay and Delhi, the commercial to the political capital, is a 21-hour train ride and Bangalore to Delhi can take three days.
Viewed in this way, air transport in India has a very secure future and is a sound business. In 2003 Indian airfares were the highest per kilometre in the world. Today they are the lowest per kilometre in the world, despite a 600% increase in costs. I do not believe that is sustainable and I do not believe the low fare model can exist in India. Indian”s were willing to pay ”150 to travel between Bangalore and Delhi, but today by some low cost carriers you can do it for ”40, despite the increase in cost. That”s good, because it has encouraged a lot of first time Indian travellers, but these entrepreneurs who look at Easyjet and Southwest, I think they will have difficulty. In India we have moved very quickly from 14 million passengers per annum to 43 million today, but that growth can be attributed to both crazy pricing and economic growth. Kingfisher addresses the second of those: sustainable growth, which is the business traveller, the small business owner. My business model is not to transform Indians travelling by bus and train onto the plane. There isn”t enough price elasticity to interest me. No low fare model can build long term shareholder value. In 2005 we decided to launch KF airlines.
You have bought only new aircraft. Why is that?
Traditionally Indian aircraft were tired and old and leased. At Kingfisher we operate only new aircraft with brand new equipment. It marks us out as different. Linked with that, Indian”s love entertainment, it”s in our blood and culture, that”s why we have Bollywood which is bigger than Hollywood. So I knew we should have in seat entertainment, which had never been seen before or done before in India. It meant I had to delay the launch of Kingfisher for seven months to get the right Inflight Entertainment, arguing with Airbus which had never had it on narrow bodied aircraft before, and even when the seats had been built we had to wait to get approval, and then get it installed and approved by my friends at the Indian aviation authority. Everyone said it was a waste of time with some of the short flight times, but within a year, the competition had followed our lead. I couldn”t let them get on a par with us, so whenever our aircraft go in for checks we install live TV. I chose this because our largest competitor operates Boeing 737 aircraft which are not licensed for live television. Indian are frenzied followers of cricket, and so people fly with us just so they can watch the cricket. It”s all about leveraging the desires of our passengers and giving them what they want. For the same reason, I conduct all the interviews for our flight crew and I know most of them. If I am flying on one of our flights and come on the tannoy to say I have asked the crew to treat you as though you were a guest in my home, they will act in a different way because they know me and know what that means.
It”s small things that make the difference. Domestically we offer a valet service at the kerb where someone helps with the luggage, and food is another thing that Indians love, so we offer caviar and smoked salmon for breakfast in our first class. A sprinkling of caviar isn”t very expensive, and then I tell our marketing people to make five pounds look like five hundred. It registers with fliers, and says that the Kingfisher experience is immediately premium. We have done the same with the wide-bodied A330-200 aircraft. My dad used to fly the old Pan Am flying boats when travel was glamorous. Now travel equals fatigue and is avoidable, so we want to create an experience people would look forward to so we have a stand up bar and lounge.
Why do you only have two classes?
Most large airlines have three classes, but I”ve looked at the trends worldwide and in India. The corporate sector is strong and growing, but people like to have good corporate deals, so the trick is to deliver superior value. So Kingfisher First has to be first class at a business class price. It offers better features than British Airways or Lufthansa, and is better than Virgin”s Upper Class, all at a business class price. And Kingfisher Class is premium economy at an economy class price.
Why now expand internationally now?
Despite high oil prices, international air capacity is expanding around 20 per cent each year. Singapore Airlines, Emirates and British Airways all want to increase their frequencies into India, and people are upgrading their on board products, so it is quite unique and different from the situation in Europe and the North Atlantic. You have to view it all in context. We have set the standards domestically, and now we intend to do the same internationally in and out of India. Our airport in Bangalore is top class now and can be used a hub, and out of London we have good connections onward to Colombo and the Maldives.
Kingfisher to fly London Heathrow to Mumbai daily from October 26 (6 September 2008)
More about Kingfisher here
Tom Otley