ETHICS OF CONSUMER

PROTECTION:KINGFISHER

AIRLINES

Submitted by:Sonu Hotwani-MBA/4501/10

Guntas Kour-MBA/4507/10

BUSINESS ETHICS Ethics, also known as moral philosophy, is a branch

of philosophy that addresses questions about morality— that is, concepts such as good and evil, right and wrong, justice and crime,etc.

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

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TWO KEY BRANCHES OF ETHICS Business ethics reflects the philosophy of business, one of

whose aims is to determine the fundamental purposes of a company. Its two branches are:

Descriptive ethics involves describing, characterizing and studying morality “What is”

Normative ethics involves supplying and justifying moral systems “What should be”

MODELS OF BUSINESS ETHICS1. Immoral Management—A style devoid of

ethical principles and active opposition to what is ethical.

2. Moral Management—Conforms to high standards of ethical behavior.

3. Amoral Management Intentional - does not consider ethical factors Unintentional - casual or careless about ethical

considerations in business

THEORIES OF BUSINESS ETHICS IN RELEVANCE WITH CONSUMER PROTECTION Contract Theory Due Care Theory Social Costs Theory

CONTRACT THEORY Duty to comply: product must be reasonably

safe for its intended useConsumer can bear risk if all 4 conditions met:

They know the risk existsThey can appraise the risk’s probability & severityThey can cope with the riskThey refuse to pay more to reduce the risk

Duty of disclosure: disclose relevant facts Duty not to misrepresent: don’t mislead Duty not to coerce: don’t exploit fear, stress,

gullibility, immaturity, or ignorance

DUE CARE THEORY Buyers & sellers don’t meet as equals

Sellers have better knowledge & expertise Buyers in vulnerable situation

Seller has a duty to exercise due care to protect consumers from harm that the seller can reasonably foresee

Seller should protect consumers by: Design Choice of materials Manufacturing process Quality control Warnings, labels, & instructions

Failure by a seller to exercise due care is considered to be negligence

SOCIAL COST THEORYStrict liability• Seller should bear all the costs when a consumer is

injured by a product Product price now reflects all costs, including costs

associated with consumer injuries Seller has incentive to protect consumers Costs spread across all users of the product

SHOULD BUSINESSES BE EXPECTED TO BEHAVE ETHICALLY? One argument is that businesses are products of the

society in which they operate, in which they sell their products, and in which they hire their employees.

So businesses should be expected to reflect the ethical standards of the surrounding society.

One problem with this view is that society doesn’t always have clear ethical standards to which businesses can stick.

For example, some people care passionately about animal experiments, and argue it is deeply unethical, whereas many other people say such experiments are justified if real people benefit medically from the research.

SHOULD BUSINESSES BE EXPECTED TO BEHAVE ETHICALLY? The opposite argument is that business are supposed to

make a profit for their owners, to create jobs for employees, and to create wealth for society as a whole.

The middle argument is that businesses in the real world (or most of them, at least) would like to do both, if possible.

But there will always be conflicts. Does the business stick with the ethical behaviour? Usually the business will go for the profits and it is this which upsets many people.

ETHICAL ISSUES IN BUSINESS TODAY

packaging and branding pricing market research market audience advertising and promotion

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PACKAGING AND BRANDING

Four aspects of packaging involve ethical issues1. Label information2. Packaging graphics3. Packaging safety4. Environmental implication of packaging

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PRICING Pricing should offer value for the money,

although it does not necessarily need to represent the lowest price on the market

Price structure is based on a number of elements, customers should understand the total cost they pay.

There should be no “hidden extra Costs”.

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UNETHICAL PRICING PRACTICES.

Price fixing Price skimming Predatory pricing Price war Dumping (pricing policy)

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MARKET RESEARCH

Ethical danger points in market research include: Invasion of privacy. Stereotyping.

MARKET AUDIENCE Ethical danger points include:

Excluding potential customers from the market: selective marketing is used to discourage demand from undesirable market sectors or disenfranchise them altogether.

Targeting the vulnerable (e.g. children, the elderly).

ETHICS IN ADVERTISING AND PROMOTION Issues over truth and honesty. In the 1940s and

1950s, tobacco used to be advertised as promoting health. Today an advertiser who fails to tell the truth not only offends against morality but also against the law.

Issues with violence, sex and profanity. Violence is an issue especially for children's advertising and advertising likely to be seen by children.

Deceptive/subliminal advertising,eg,use of humor.

. The advertising of certain products may strongly offend some people while being in the interests of others. Examples include: female hygiene products.

 The advertising of contraceptives has become acceptable in the interests of AIDS-prevention, but are nevertheless seen by some as promoting promiscuity. Some companies have actually marketed themselves on the basis of controversial advertising .

Negative advertising techniques, such as attack ads. In negative advertising, the advertiser highlights the disadvantages of competitor products rather than the advantages of their own.

KINGFISHER-FLY THE GOOD TIMES

THE KINGFISHER WEBSITE WELCOMES ONE WITH THE FOLLOWING MESSAGES Welcome aboard Kingfisher Airlines, where you

are made to feel like an honoured guest and not just a passenger. At Kingfisher, a flight is not a journey between two airports but an experience of a lifetime.

As Kingfisher takes off into the international skies, you can expect a world-class experience. Every Kingfisher aircraft meets the global standards that have been set in terms of safety and performance.

Our brand-new fleet incorporates the latest technology.

VISION

“The Kingfisher Airlines family will consistently deliver a safe, value-based and enjoyable travel experience to all our guests.”

VALUES Safety

This is our overriding value. In our line of business, there is no compromise.ServiceWe are all in the hospitality business; we must always seek to serve our guests and gain their trust, goodwill and loyalty.HappinessWe seek to build an organisation with people who choose to be happy, and will endeavour to influence our guests and co-workers to be happy too.TeamworkWe will succeed or fail as a team. Each one of us must respect our colleagues regardless of their rank, and we must work together to ensure our mutual success.AccountabilityEach one of us will be held accountable for the successful execution of our duties, commitments and obligations, and we will strive to lead by example.

CUSTOMER CARE On Nov 8,2011 Kingfisher cancelled 31 flights in one day. Had it been the United States, Kingfisher Airlines would

have closed down. People with booked tickets could not fly. This follows the sudden decision of Kingfisher Airlines to

cancel many of its important trunk route and metro flights simply 'unannounced'.

Not just that even when the announcement did come, the actual no go flights were far more than the planned no go flights.

During winter schedule 2011, the airline did not operate 175 daily flights due to non-availability of flights.

SAFETY ISSUES DGCA chief Bharat Bhushan finalized the financial surveillance report

on December 28, 2011, which says it was unsafe for cash-strapped Kingfisher Airlines to fly and should be wound up

The report says: "A reasonable case exists for withdrawal of their (Kingfisher's) airline operator permit (licence) as their financial stress is likely to impinge on safety.“

 On Kingfisher, the DGCA finding report dated December 27, 2011, says: "The airline has 64 aircraft in its fleet out of which 20 (or nearly 1/3rd of its fleet) are grounded due to want of spares, engines, components, etc.

There is a shortage of 28 engines for 16 aircrafts.

Most of spares of ATR aircraft are not available

STAKEHOLDERS INTEREST On Jan 05,2012, State Bank of India, cash-strapped Kingfisher

Airlines' largest creditor, called it a non-performing asset. "Kingfisher is a NPA (non-performing asset) for us. They are in default," SBI Chairman Pratip Chaudhuri said.

SBI's exposure is the highest among any of the lenders to the airline, followed by IDBI Bank, Punjab National Bank ,Bank of India and Bank of Baroda.

The private carrier is in a financial mess and struggling to service its loans, which have run up to over Rs 6,000 crore.

The shareholder have received no profits at all in the last financial year,

DELAYED SALARIES Aug 2011 Kingfisher Airlines has delayed salaries (for Jul 2011) of its employees

in Aug 2011. The management stated that it does not have the money, and has not given any date for the payment. Kingfisher airline had earlier stated that due to the bank strike, the salaries could not be processed.

Employees were paid salaries on the 7th of every month. Earlier, the company used to pay on the 31st.

Oct 2011 In the month of Oct 2011, salary payment for the month of Sep 2011

had been delayed by Kingfisher Airlines. Salaries were normally credited to the accounts of its employees on the 7th day of every month..

Nov 2011 Kingfisher airline could not pay salaries (on time) to it staff

in the month of November 2011. Dec 2011 The airline could not pay salaries to it staff for the month of

December 2011. In protest, Kingfisher pilots started making in-flight announcements citing "It is their sense of duty towards the guest that is making them fly despite not being paid salaries for the past two months". 

Almost 130 pilots had quit Kingfisher by November 11,2011 due to to the financial crisis being faced by the Carrier.

TAXING PROBLEM Cash-strapped Indian carrier Kingfisher Airlines has not

deposited with the government most of the income tax it deducted from its employees' salaries for the last two fiscal years.

Kingfisher has about INR1.3 billion rupees of tax deducted at source (TDS) to be deposited with the government and has committed to pay it by the end of the current financial year to March 2012.

Tax officials had temporarily frozen 11 bank accounts of Kingfisher after the airline failed to pay service tax dues.

FUEL DUES HPCL: In Jul 2011, Hindustan Petroleum

Corporation Limited (HPCL) stopped the fuel supplies for about two hours to Kingfisher airlines owing to the non-payment of dues. Situation was later resolved. In the past several years, Kingfisher airlines has had trouble paying their fuel bills.

BPCL: Bharat Petroleum Corporation in 2009 had filed a case against Kingfisher airlines for non-payment of dues. High court in an order said that the entire amount had to be paid by Nov 2010 and the airline paid it in instalments.

LEASE RENTAL DEFAULT Since 2008, it has been reported that Kingfisher Airlines has

been unable to pay the aircraft lease rentals on time.

GECAS: In Nov 2008, GE Commercial Aviation Services threatened to repossess 04 leased planes in lieu of default. Kingfisher Airlines initially denied that it missed the payments but later Kingfisher had to return the A320 aircraft to GECAS.

DVB: In Jul 2010, DVB Aviation Finance Asia Ltd sued Kingfisher Airlines for lease rental default. Case was filed in a UK court on Jul 16, 2010 after Kingfisher did not pay for three month lease rental for A320 aircraft it leased from DVB.

CONCLUSION:BENEFITS OF ETHICS Providing organizational guidelines for business

integrity in turbulent times. Helping employees deal with ethical issues they

face daily on the job. Building solid company teamwork and

productivity. Creating an insurance policy – to help ensure

that company policies and procedures are legal. Reinforcing the values associated with quality

management, strategic planning, and diversity management.

Promoting a strong public image. Improving society.