India's second-largest airline by the number of passengers carried, Kingfisher Airlines Ltd, will exit its low-cost business - the former Air Deccan renamed Kingfisher Red - and focus on the premium model, chairman Vijay Mallya said on Wednesday. This signals a marked shift in an industry where most carriers are betting on the low-cost space."Kingfisher will be dropping the Kingfisher Red class of service. This effort will be concluded in the next four months," the airline said in a statement issued after the company's 16th annual general meeting in Bangalore.
"We are doing away with Kingfisher Red because we do not wish to compete in the low- cost segment," said Mallya.
"We believe that there are more than enough guests who prefer to travel the full service Kingfisher class," said Mallya, who also heads the $4-billion (Rs 19,680-crore) UB Group.
Kingfisher shares closed down 1.2% to Rs 24.8 on the Bombay Stock Exchange.
"The margins of Kingfisher Class are higher than Kingfisher Red. That's because the yields are better," Mallya said.
Kingfisher Red was launched after Mallya acquired Air Deccan from Captain GR Gopinath in 2008. The airline will reconfigure its aircraft to add additional capacity to improve revenues.
"Kingfisher continues to work with the consortium of banks to further reduce the interest cost. Some of the proposed initiatives include sale and lease-back of some of its aircraft and other assets to reduce loans and converting part of its rupee loans into low-cost forex loans," Mallya said. The high cost jet fuel, he said, coupled with a weakening rupee were the biggest challenges before the industry.