The Brand Meltdown

The Kingfisher Airlines fiasco has put a question mark on methodologies used to value brands. It also has a lot of lessons for brand valuation companies.

- Ajita Shashidhar

Accounting firm Grant Thornton valued brand Kingfisher Airlines (KFA) at `4,100 crore in 2008. With 32 per cent-plus market share then, KFA was the undisputed leader. Its owner, Vijay Mallya, pampered flyers with inflight entertainment and exotic food, which cost crores. The airline made losses all through except in 2010/11, when it made a small profit. Worse, Mallya bought lossmaking Air Deccan. KFA went bust in 2012. So, what went wrong?

Branding gurus say Mallya took rules that had worked for him in the FMCG sector and applied them to his airline. This misfired. In FMCG, growing by spending heavily on advertising and acquiring market share through acquisitions is the norm. Mallya, however, acquired bankruptcy when he bought Air Deccan.

KFA had borrowed over `9,000 crore from banks. Creditors are trying to recover some money by selling the brand. It is, obviously, extinct, and doesn’t have takers, despite the fact that the trademarks ‘King of Good Times’ and ‘Fly Kingfisher’ could have fitted into the branding strategy of any existing or start-up airline. “The controversy surrounding Kingfisher may have damaged the brand, so no airline has come forward,” says Aaron Keller, Managing Principal of US-based brand consultancy Capsule. The creditors have taken Grant Thornton to court, questioning the basis on which it assigned the brand such a value.

 

The episode has put a question mark on the working of brand valuation companies which, say experts,must update their models according to fast-changing market realities. Banks, too, have to learn.