Group : 4

Group Members : Akshay Prerna Nikita Aanchal Ankit

Group Members : Issu Surbhi Jayant Ravi Yedu

Indian Aviation Industry

By 2020, Indian Airports are estimated to handle 100 million passengers, including 60 million domestic passengers.

ABOUT KINGFISHER AIRLINES Kingfisher Airlines started it’s operations on May 9th, 2005 and they began by leasing 4 Airbus 320

Coined the term “Value carrier” : that means they are not like Air Deccan & will offer some frills

Kingfisher has been certified as being one of the six airlines in the world to have a five star rating from Skytrax

Kingfisher Airlines defined its target audience – SEC A, SEC B+ in the age group of 25-45 years of age

OFFERINGS

Kingfisher Airlines offers ( First to do this)

Brand new aircraft Personal assistance in baggage handling Video on demand services Designer interiors Gourmet cuisine In-flight entertainment ( including more than 5 TV and 10 Radio)

Voted India’s Favorite Airline. India’s only 5 star accredited airline

MALLYA IS FROM VENUS, I AM FROM MARS

-CAPT. G.R. GOPINATH

MALLYA SET HIS EYES ON DECCAN AIRLINES

BUT……..

KINGFISHER AND AIR DECCAN HAD CONTRASTING INTERESTS

KINGFISHER CELEBRATED LUXURY, LIFESTYLE

AND DIFFERENT CUISINES

BUT

AIR DECCAN WAS A NO-FRILLS OPERATOR

BOARD OF AIR DECCAN APPROVED 26% INVESTMENT BY UB GROUP IN THE LOW COST

OPERATOR.

KINGFISHER AND AIR DECCAN CAME TOGATHER

LATER……..

PROPOSAL OF BRINGING AIR DECCAN AND KINGFISHER UNDER ONE BRAND NAME

FOR BETTER INTERNATIONAL OPERATIONS

HOW DOES CHANGE IN BRAND NAME HELP IN INTERNATIONAL OPERATIONS ????

MERGER EQUATION

THE LOW COST DOMESTIC AIRLINE LUXURY DOMESTIC AND INTERNATONAL AIRLINE OPERATOR

LOW COST DECCAN CONCEPT- KINGFISHER

AVATARMALLYA’S CO. WHICH BOUGHT STAKE

IN DECCAN AIRLINES

AND SOON…….

AIR DECCAN CEASED TO EXIST

AND

KINGFISHER BECAME SYNONYMOUS TOLUXURY AND CLASS…….

In the good times

GROWTH STORY

The growth story… 2003Kingfisher established

2005Inaugural flightMajor competitors

2006kingfisher = Five star travelIn-flight entertainment Talks held with Air Deccan

200717.5 million passengers,41 aircrafts, 255 flightsAcquired Air DeccanIncome `15.4 billion, loss reduced to ` 1.8million

2008

Kingfisher was carrying 10.9 Million passengers annually with a fleet of 77 aircrafts operating 412 domestic flights daily.

Permit to operate on international routes and on September 2008 kingfisher flew for the first time overseas from Bangalore to London.

It started offering 3 classes of travel to passengers: •Kingfisher First•Kingfisher Class •Kingfisher Red

Financial statements for year ending March 31st 2009 were actually supposed to be consolidated statements of both Kingfisher Airlines and Air Deccan. Thus income increased many folds to INR 55 Billion but so did the losses which increased to INR 16 Billion.

2009

Continued its run of the being the nation’s largest passenger carrier and having a healthy market share of 22.9% with 11 Million passengers flying with Kingfisher in the last fiscal year.

The fleet reduced to 68 aircrafts from 77 aircrafts

Domestic flights per year got reduced to 366 but

International operations increased significantly to 12 flights daily.

Won numerous awards from agencies around the globe and continued being rated as India’s only Five Star Airline by Skytrax for three years in a row. Since its birth 4 years ago shareholders were still waiting to receive their 1st dividend from the company.

It reported a marginally increased losses of INR 16.4 Billion and gross income shrunk to INR 52.7 Billion for year ending March 31st 2010

2010

Jet Airways surpassed Kingfisher Airlines to become country’s largest passenger airliner as it reported a market share of 25.5% whereas for Kingfisher it came down to 19.8% down by almost 3% from last year.

Indigo was finally getting noticed as it reported a good 90% seats being filled and was gaining market share rapidly.

Kingfisher’s domestic daily operations were same 366 flights daily but its international operations increased to 28 flights daily.

The airline reported an increased gross income of INR 64.9 Billion and reduced losses of INR 10.2 Billion for the year ending 31st March 2011.

2011

Kingfisher Airlines for the very first time declared in year 2011 that it is having some serious cash flow problems.

Blamed the same to rising fuel costs

Dozens of pilots left Kingfisher for rival airlines during 2011.

On 5th January 2012 State Bank of India (largest creditor of cash strapped Kingfisher Airlines) declared Kingfisher Airlines as a non performing asset.‐

And thus started the down fall of kingfisher airlines

FAILURE OF KINGFISHER AIRLINES

• Huge interest outgo due to heavy investments in purchase of aircraft.

• Highly competitive industry.

• Pressure from aviation committees and government policies.

• Laying off employees caused a bad image.

• Economic slowdown.

• Fuel price hike.

• Heavy debt.

REASONS BEHIND KINGFISHER FAILURE

LACK OF DELEGATION

• "I am taking things personally," Vijay Mallya, chairman of Kingfisher Airlines, says when it comes to running his airline.

• His attitude of ‘Ekla Chalo Re’ in airline venture caused him much harm than good as he didn’t delegate the business operations and decision making rights to other skilled executives who could have taken much better decisions than him.

FREQUENT CHANGES

Faced problems because of frequent changes in :

• Strategy and direction • The absence of no long term CEO or MD.

FAULTY BUSINESS MODEL

• The business model of Kingfisher Airlines (KFA) was always a recipe for disaster.

• Those in the aviation business were amazed and amused to see its self-styled 'king of good times' owner, Vijay Mallya, splurging on the airline as if there was no tomorrow.

TREATED AS A “STEP-CHILD”

GOPINATH SAYS,

“Low-cost aviation business was treated as a step-child. I was telling Mallya that it is now his child and there

should be equal treatment. Post the merger, whenever there was an Air Deccan and Kingfisher flight at almost the same time-slots, a decision was taken to do away with the Air Deccan flight in the hope that the passengers will graduate to Kingfisher full-service. But just the opposite happened. They went to other LCCs”

IMPROPER HANDLING OF FINANCES

• Since its inception in 2005 Kingfisher never

earned a single penny• increasing its losses year after year • management of the company took no big

step to reduce their cost.• The ever increasing Debt is also a major worry

for the company.

VIJAY MALLYA’S OVER ENTHUSIASM KILLED KINGFISHER AIRLINES

• The man behind Kingfisher, Dr. Vijay Mallya

himself killed Kingfisher Airline.• Mr Mallya did not accept his airline's failure

and continuously pouring money from the profits of his other ventures and by taking loans.

Financial Crises

• It started in the month of November 2011, Kingfisher airlines could not pay- pilots, stewardesses, janitors, fuel prices

• It has a total debt of Rs. 7000 cr. even after about Rs. 1400 cr. was kind of written off last year.

• The airline made an operational loss of Rs 1027 crore losses over the last year operation.

• And the loss since its inception in 2003, a small matter of Rs. 5,690 cr.

• It owes a sum total of approximately Rs 890 crore to all its fuel suppliers. This has led the fuel supplier (IOCL, BPCL and HPCL) to put kingfisher on a cash and carry basis

• BPCL has even filed a court case for recovery on unpaid dues of over 250 cr.

• It owes the Airports Authority of India, undisclosed landing charges.

• Bangalore and the Hyderabad airports have decided to ask Kingfisher for landing charges before they allow the KF planes to land.

• It has absolutely no assets that it can sell or mortgage

• Kingfisher has been a loss-making entity since the day Mallaya announced its launch in 2003.

BAILOUT ATTEMPT At the time of restructuring, Kingfisher’s total

debt was Rs 8,414 cr. To reduce that, banks decided to convert

some of it to equity to give Mallya a breather.The bankers converted, approximately Rs 750 cr. to equity. In lieu of the waive off, the banks got a 23% stake in the airline.

• Further banks reduced the interest rate by 2.5% on the left debt further causing 150-180 cr. losses to bank in terms of interest on loan

• Mallya was also given additional term loans of Rs 1,000 cr., to keep his airline afloat.

• In addition to that, Rs 553 cr. of debt was converted to Compulsorily Redeemable Preference Shares (CRPS), to be returned at a later date. But that amount would not be reflected in KFA’s debt column

Kingfisher Airlines, is seeing its worst time in recent months. All the ‘service with glamour’ provided by Vijay Mallya is not looking so glamorous at the closed ticket counters. Several flights have been cancelled and Government is swinging between the idea of shutting down or not shutting down the service.

WHAT WENT WRONG

Mallya kept the business under his direct control instead of hiring a team of expert CEO’s.

To cut cost Mr. Mallya started cutting the salaries and perks of their staffs which left them with no other option but to quit and thus there was shortage of ground and flying staff.

Another reason for its collapse is the takeover of Air Deccan in 550 crore acquisition which gave birth to Kingfisher Red.

Kingfisher Red was providing same service as that of Kingfisher airlines but at a lower cost which cannibalized the share of its parent airline.

In spite of having losses in domestic sector Mallya expanded the operations of kingfisher airline to international destinations which added fuel to fire of huge losses.

To compensate for the losses Mallya took huge loans from various banks which further worsened the condition of Kingfisher airlines and the King of good times turned to be a King of Bad times.

Possible Solutions for low cost flying

WHAT KINGFISHER COULD HAVE DONE

Remove the flights from low frequency routes.

Try to bring down the cost-per-flight.

Avoid aggressive expansion of fleets.

Try to focus on smaller aircrafts(50-70 seater) and fuel efficient planes for short distance.

For long term strategy , internationally focus should remain on one region at a time.

Meet the customers expectation so as to gain there loyalty and also leading to word of mouth marketing.

Keep it worthwhile for the suppliers of the necessary resources to continue to do business with them.

Meet the aspiration of its employees so as to keep them motivated and retain the talent for future growth.

HELP FOR KINGFISHER AIRLINESDeal between Diageo and United Spirits could have provided kingfisher with enough funds to get itself out of its trouble but the deal failed.

FDI in Aviation can also help kingfisher to continue its operation in India.

Kingfisher Airlines, is in talks with two foreign carriers, including International Airlines Group (IAG)- the owner of British Airways and Iberia, for a potential rescue package.

Collaboration with these aviation giants can help Kingfisher to maintain its existence in Indian aviation sector as they can provide financial assistance for the loss bearing airline

These companies have much experience in aviation sector that could be helpful for kingfisher airlines to operate at low cost by providing quality service

But some economist also hold the opinion that FDI in Aviation may not help Kingfisher airlines as international companies may not want to invest in a company with such a huge debt

The investors will definitely invest in companies which have great potential to grow in Indian and Foreign aviation sector

Will FDI really Help??

Now only time will tell that what will be the future of this ‘once most stylish and attractive’ aircraft carrier. Everyone’s fingers are crossed and are expecting the airline to come out of this mess before Vijay Mallya starts screaming ‘Mayday’.

Thank You