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Transcript of kingfisher airlines investor ppt
Kingfisher Airlines
March 2010
Table of Contents
• Section 1: Kingfisher Airlines Overview
• Section 2: India Aviation Market
• Section 3: Recent Performance and Continued Initiatives
2
Section 1
Kingfisher Airlines Overview
3
Kingfisher offers premium service with an efficient cost structure in the world’s most attractive aviation market
Indian aviation market is on a recovery path and is poised for long-term accelerated growth
− Recovery in the market is underway (14% load factor growth, 11% yield growth, 30% pax traffic growth)
− Aviation is poised for secular growth of 15-20% (GDP growth at 8-9% Aviation growth 2x 4 trips/100 people)Aviation is poised for secular growth of 15 20% (GDP growth at 8 9%, Aviation growth 2x, 4 trips/100 people)
− Irrational exuberance of capacity addition witnessed in the past is unlikely to recur (Air India likely to rationalize
capacity by 30%, All other airlines expected to add only 10-15 planes in next year on base of 260)
− Enabling conditions are improving; Significant upgradation in infrastructure of airportsEnabling conditions are improving; Significant upgradation in infrastructure of airports
Indian market is unique; Transplanting global models in India has rarely worked
− Indian geography makes airline travel indispensable; Emerging demographic profile requires equal focus on
metro and Tier-2 cities; Higher growth likely inTier-2 cities which are typically located in 500-600km from key
metros
− After years of deprivation, Indian consumers are moving towards conspicuous consumption; deep-rooted class
conscious mindset
− Large proportion of consumers continue to be ‘indirect’ purchasers; leisure traffic is limited
− No cost advantage for LCC operators (No separate airports, same personnel costs, low ancillary revenue, limited
online booking)
4
− Indian markets is more suited for short and medium-haul international routes at current fuel prices
− Slot constraints in metro airports create entry barriers for new players
Kingfisher offers premium service with an efficient cost structure in the world’s most attractive aviation market
Kingfisher offers a unique model which serves all Indian consumer segments & positions KFA to capture all growth opportunities in India
− Airbus and ATR fleet provides unique advantage to capture growth in metro, Tier-2 cities and international market
− Premium offering covering all consumer segments (Only Indian airline with 5-star rating)
− KF First for high end business & premium consumers (valet service, gourmet cuisine, stand-up bar & lounge)
− Kingfisher Class for business consumers (IFE, superior service)
− Kingfisher Red for value-conscious (Food on Board, Lounge access, FFP)
− Cost - competitiveness to ensure premium services are offered at value price points
− Cost difference with LCC would be limited to Food-on Board ($1.5) and GDS costs ($5)
Kingfisher has developed unique advantage over its competitors
− Best ‘lifestyle’ brand in the country supported by multiple UB group properties (e.g. Beer, Force India, IPL); 50 years
of serving the Indian market provides unique consumer insights
− Largest Indian domestic carrier by market share; widest domestic network connectivity (~ 400 daily flights) to
leverage growth across all segments (Highest frequencies in key metros; Maximum day-return products; 29
l i it i 400+ ti )
5
exclusive city pairs; 400+ connections)
(contd.)
Kingfisher offers premium service with an efficient cost structure in the world’s most attractive aviation market
(contd.)
− First carrier to enter Big-3 alliances – One World; In addition, Kingfisher and Jet are the only private carriers
currently to have approval for international operationsy pp p
− Medium-haul routes connect to hubs of major participants in the alliance (HKG, LHR, SIN); These routes
also serve large Indian diaspora
− All short-haul routes to neighboring countries served through cost-effective A320 which increase aircraft g g g
utilization
− Innovative FFP program has attracted over 1.1 million members in 4 years (68% cabin penetration in First)
Kingfisher is India’s most efficient and flexible Airline
− Consistently rated best on consumer satisfaction across surveys (rated higher than SQ in Asia)
− Best on-time performance amongst scheduled carriers (82%+ in Jan ‘10)
− Highest operational reliability of A321 fleet in world and one of the best technical despatch reliability in A320 fleet
− High aircraft utilization (~12 hrs on Airbus in a non ‘red-eye’ market)
− Low employee/aircraft ratio at 115; Non-unionized workforce; Outsourced model ensures low fixed costs
6
− 25% of Airbus fleet is flexible; can be branded as Kingfisher Class OR Kingfisher Red based on market needs
Kingfisher offers premium service with an efficient cost structure in the world’s most attractive aviation market
Kingfisher is now focused on ensuring sustainable and profitable growth
− Experienced management team is in place with deep aviation experience
− Rationalized capacity by > 20% during past 2 years; At the same time order book position will ensure− Rationalized capacity by > 20% during past 2 years; At the same time order book position will ensure
lucrative growth to capitalize on demand uptick
− Steadily increasing Passenger RASK (21% increase from Rs 3.19 to Rs 3.86 over past 6 quarters);
Several revenue enhancement initiatives identified and initiated, which would further enhance RASKSeveral revenue enhancement initiatives identified and initiated, which would further enhance RASK
− Kingfisher Xpress cargo service, One Stop Connect campaign, code share agreements with key
global carriers, updated FFP program, Internet Booking Engine, Revenue Management initiatives,
One World Alliance
− Aggressive cost reduction plan targeted to reduce costs
−Rationalizing distribution costs, Reduction in expat pilots, renegotiating E&M vendor agreements,
renewal of operating leases at 20% discount, additional operational efficiencies (fuel consumption,
overheads)
− Balance sheet being restructured to re-phase and reduce debt
− Appointment of Seabury as advisors to identify further opportunities for efficiency enhancement
7
− Additional upside possible through policy initiatives like tax rationalization on fuel
UB Group – Transparent Holding Structure (as on date)
Held by UBHL
Held by Promoters
Total Group Holding
Promoter Group UBHL
51.8%
and Other Group Cos.
USL 29.11% 6.65% 35.76%
UBL 12.62% 24.87% 37.49%
Real Estate (UB City) Investments Pegasus License
KFA 60.58% 5.69% 66.27%
UB Engg
37.18% 3.56% 40.74%Other InvAviationBeerSpirits
gg
MCF 24.51% 5.94% 30.45%
Aventis 10.22% - 10.22%Aventis
Pharma LtdKingfisher
Airlines LtdUnited
Breweries Ltd
United Spirits Ltd
10.2%60.6%12.6%35.8%
Mangalore Chemicals &
Fertilizers LtdMillennium Alcobev
Whyte & Mackay
24.5%50%
100%
8
UB Engineering Ltd
37.2%
UB Group’s Entry into Aviation
• UB Group’s dominance of its core beverage business gave it unique strengths
May-05KFA first flight
31-May-07Jan-05business, gave it unique strengths
– Sharp understanding of the evolving tastes and behavior of the Indian consumer
– Ability to create premium products with true value N d d t di f ti i
KFA – first flight KFA buys 26% stake in Air Deccan @ INR150/share
Jul-05
Oct-05
Apr-05
– Nuanced understanding of operating in a highly regulated environment
• Aviation offered extra ordinary growth potential in an emerging economy like India
Oct-08India’s largest carrier with ~ 28% market share
21-Jul-08Launches plans for international operations and Kingfisher First
Jan-08
Apr-08
– UB group launched Kingfisher Airlines to leverage on its unique strengths
• Aviation business has been built on three core competencies of the groupJan-10 1-Sep-08
Jul-08
Oct-08
Apr-09
– Ability to deliver a unique experience while remaining competitive
– Ability to manage scale up – Ability to tightly manage costs
Kingfisher dominates with widest network coverage of about 63 cities operating over 375 flights a day within India
Deccan to be renamed as Kingfisher Red
Oct-09
Jan-10
Jul-09
9
Strong and Highly Experienced Management Team
Chairman & CEO
Dr. Vijay Mallya
Operations & EngineeringHitesh PatelEVP
FinanceA RaghunathanCFO
In-Flight & ServicesRajesh VermaEVP
CommercialManoj ChackoEVP
ITSourav SinhaCIO
Mallya
• Currently leading operations and engineering at Kingfisher Airlines, Hitesh has over
• Mr. A Raghunathan is a qualified Chartered Accountant with over three decades of work
• Rajesh heads Guest Services, In Flight Services, Airports and Security functions at
• Manoj has over 18 years of experience in Indian and international airlines and travel services. He
EVP EVP
• Sourav currently heads Information technology at KFA and has over 17 years of work experienceAirlines, Hitesh has over
27 years of work experience in the Airline industry. Prior to joining KFA, Hitesh managed the line and base maintenance operations at JetBlue Airways in United States
decades of work experience in finance and accounts. Before taking over as the CFO of Kingfisher Airlines, Mr. A Raghunathan worked in senior finance positions in the liquor business of UB
Security functions at Kingfisher Airlines and has rich experience in the Airline and Hospitality industries. Prior to KFA, he worked with Jet Airways for over 10 years. Rajesh has also worked with the
travel services. He currently heads the Commercial function at Kingfisher airlines and is responsible for the Sales, Revenue Management, Network Planning, Alliances and Loyalty
years of work experience with airline systems and technology. Prior to joining Kingfisher, he spent 10 years with TCS and was the head of IT department at Qatar Airways
yas a Director for over 6 years. Hitesh enjoys the record of having maintained the best fleet with the highest dispatch reliability of Airbus A320s world-wide
qgroup for 26 years. He is responsible for Finance, Accounts, Legal, Secretarial, Purchase & Administration
ITC-Welcome Groupy y
functions. Prior to joining Kingfisher, he has worked with American Express (Travel services division) and Emirates
10
Strong and Highly Experienced Management Team (contd.)
Chairman & CEO
Dr. Vijay Mallya
Corporate Development & PlanningA it A l
MarketingRavikant SabnavisVP
Human ResourcesRubi AryaVP
Quality & Guest CommitmentGaurav RathoreAVP
SecurityMaj. Leslie MissalAVP
Mallya
Amit AgarwalSr. VP
AVP
• Amit has recently joined Kingfisher as Sr. VP –Corporate Development and Planning. He comes
• Ravikant currently heads the Marketing function at Kingfisher Airlines and overall has an experience
• Rubi heads the Human Resources function at Kingfisher Airlines. She has over 13 years of
• Gaurav is responsible for the Quality, Guest Commitment & Call Centre functions in Kingfisher
• Major Leslie is the head of the Security function at Kingfisher Airlines. Prior to Kingfisher Airlines, he wasand Planning. He comes
with a strong airline background spanning over 17 years with leading airlines such as American Airlines, Continental Airlines and Delta Airlines. His last role with Delta was
overall has an experience of 18 years in Marketing. He joined the UB group in 2007 and was Divisional Vice President-Marketing prior to joining Kingfisher Airlines in September 2009.
has over 13 years of experience spanning various industries and consulting. An MBA in Human Resources from India’s premier institute XLRI, she was previously associated with the UB
functions in Kingfisher Airlines. Gaurav has over 15 years experience in the aviation industry. Prior to joining Kingfisher, Gaurav worked with Jet Airways where he was heading the Service Quality Group.
Kingfisher Airlines, he was associated with the UB group since 2003, in the role of Security Advisor. Prior to his stint with the UB Group, Major Leslie served the Indian Army for 10 years in counter-
Managing Director for RM, Pricing & the Network Group.
group. Prior to that, she worked with PricewaterhouseCoopers in their Human Capital Solutions group .
y p yinsurgency areas, and as a Black Cat Commando for 3 years.
11
A Premier Product for the Indian Flyer with a Low Cost Focus
Strong Kingfisher Brand High brand salience & preference in the minds of Indian consumer
C
Diversified Network Well spread on business and leisure routes
No Legacy Issues (Unions etc)Costs more aligned towards low cost modelAllow high level of operational flexibility
Monopoly Destinations Highest exclusive stations amongst private carriers
High Service Quality Levels Premium business class product, well trained young staff
Balanced & Flexible Aircraft Configuration
Well positioned to capitalize on the demand uptickSegmented customer base targeted effectively through three sub brands “Kingfisher First”, “Kingfisher Class” and “Kingfisher Red”Flexibility to deploy same aircrafts across Kingfisher Class and Kingfisher Red basedFlexibility to deploy same aircrafts across Kingfisher Class and Kingfisher Red based on need
Outsourced Ground Handling Protection against policy change
12
More than 1 million members; superior features like faster tier upgrade, non-air reward shop, family club program encouraging customer stickinessUnique Frequent Flyer Program
Widely Recognized for Brand Strength and World Class Service
Asia Pacific’s “Top Airline Brand” in a survey conducted by TNS on 'Asia Pacific's Top 1,000 Brands' for 2008 (2007 SQ)(2007 – SQ)
Voted India’s No. 1 airline in customer responsiveness in an independent survey
Voted India’s No 1 airline in customer satisfaction in an independent survey conducted by India’s largestVoted India s No. 1 airline in customer satisfaction in an independent survey conducted by India s largest business magazine
Rated the ‘Best Airline in Central Asia’ at the SKYTRAX World Airline Awards in 2009
Economic Travel award for ‘India's top rated Domestic Airline- Full Service’ for Kingfisher Airlines and ‘India's top rated Domestic Airline- Low Cost’ for Kingfisher Red (2009)
‘India’s favorite airline’ as per recent HT-MaRS consumer survey (2009)
Kingfisher Airlines’ frequent flyer program, King Club received 2 Freddie Awards for Best Bonus Promotion and Best Customer Service in 2009
13
“What Makes Kingfisher India’s Favorite Airline?”The Hindustan Times- MaRS Consumer Satisfaction Survey” rated Kingfisher as India’s Favorite Airline
Overall Rating of Airlines Operators (1)
Aggregating Their Flying Experiences on All Airlines, Indian Flyers Gave a
786
794
J t Ai
Kingfisher
Satisfaction Rating of 794 out of 1,000“ Kingfisher’s valets (porters and loaders) make a great difference for guests. Kingfisher does a little extra, which passengers like. It is also seen as a glamorous airline and people do like that, too. Then, of course, it serves excellent on-board cuisine” - Ajay Prakash, CEO of Mumbai-based Nomad
773
786
Spice Jet
Jet Airways j y ,Travels
“The inquisitiveness about Mallya and his lifestyle draws a sizeable number of flyers to Kingfisher. Given an option, I prefer
752
761
Go Air
Indigo Kingfisher. It is much better value for money”
Ankur Bhatia, MD, Amadeus India, the country’s largest online reservation system
736
745
Air India
Jet Lite “Kingfisher is the best due to its competitive fares and hygienic washrooms. Their service attitude makes all the difference. I will prefer Kingfisher even if the fare is 5 per cent more.”
Rajesh Verma, Mumbai-based exporter
14
700 720 740 760 780 800
Notes(1) Higher scores indicate greater satisfaction levels
Differentiated Strategy Offers Best-in-Class Value
Gourmet Cuisine• Only domestic airline to provide
Gourmet menus created by a team of renowned Chefs
Complimentary Hot & Filling On-Flight Meals
• Only low cost airline to provide complimentary meals including breakfast, lunch, snacks and dinner depending on flight timings
In-Flight Reading Material
• Our on-board reading material is a mix of International and Domestic, Business, Fashion and Leisure Magazines
• The newspaper selection ranges from The International Herald Tribune and
In-Flight Reading Material
• Selection of Indian publications such as Cine Blitz, Times of India, Economic Times and local newspapers as on board reading material
Kingfisher Lounge in the
• Kingfisher First lounge on board is staffed by professionally trained Bartenders offering Signature
The UK Times to ethnic language publications
Frequent Flier Privileges
material
• Only low cost airline in India to offer Frequent Flier Privileges g
Air Bartenders offering Signature Cocktails in a luxurious setting
In-Flight Guest
• Kingfisher First Amenities (Perfumes, Eau de Toilettes, Moisturisers, Lip B l d t il d Sl S it )
Privileges
Efficient Service
• Reward system linked to King Club
• A judicious mix of customer service and basic comforts provided at low
t
15
In Flight Guest Amenities Balms and tailored Sleeper Suits)
exclusively designed by Salvatore Ferragamo
Efficient Service at Low Cost
cost• Delivers a delightful experience to the
cost conscious yet discerning traveler
Partnerships & Frequent Flyer Program
• More than 88 bilateral and unilateral interline partners across the world
• Focused on attaining code sharesPartnerships • Focused on attaining code shares
• Only Indian private carrier slated to join a global Alliance- One World, which is expected to further enhance revenue and streamline costs
Frequent Flyer Program
• Huge member base in just 4 years of launch (~1.16 million members growing at 46% YoY)
• Awarded Two top honors at Freddie Awards 2008 (Best Bonus promotions , Best Customer Service)
• One-of-its kind benefits like family club and non-air rewards
• Very high cabin penetration levels indicating affinity to the product (Kingfisher First penetration ~68%)Very high cabin penetration levels indicating affinity to the product (Kingfisher First penetration 68%)
• Significant ancillary revenue generation through 57 partners across 10 verticals ( Banking, Hotel, Retail)
New Developments and way forward
• Launch of an auto-sweep co brand credit card (current and new partner) expected by Q2 FY11
• Launch of debit co-brand card expected by Q4FY11
• Extension of King Miles as a preferred loyalty currency by increasing width of partners
• Increased CRM based analytics and campaigns
16
One World Alliance
World’s most profitable global alliance, bringing together the leading airline carriers- American Airlines
One World serves 800 airports in 150 countries. It operates 9,000 daily flights, carrying 340 mn
About One World
together the leading airline carriers American Airlines, British Airways, Cathay Pacific, Qantas, Finnair passengers annually, on a combined fleet of 2,500
aircraft
Voted the World’s Leading Airline Alliance for the seventh year running in the 2009 World Travel Awards
Only alliance with member airlines based in every continent and with members based in South America,
Australia and Asia’s Middle East
Access to market share and network without significant addition of financial investments
Access to landing/parking slots and gates that are typically leased to the larger airlines
Key Benefits for Kingfisher
Access to landing/parking slots and gates that are typically leased to the larger airlines
Significantly enhance customer proposition– Top-tier qualifying miles– Top-tier recognition
Global lounge access
17
– Global lounge access
Provide further opportunities for cost savings and access to management best practices
Powerful Marketing Efforts Drive the Kingfisher Brand Strength
Movie Associations and in - Film Branding
EventsEvents
Kingfisher Cabin Crewat the TiE Summit
Cabin Crew with Delhi CMat Delhi Marathon
Events: Women’s Conference with Cherie Blair
Outdoor Branding
18
Significant Marketing Synergies from Parent Group Branding
Formula 1 Car Racing Team Kingfisher East Bengal Football Club
Leveraging Group Marketing Assets
Royal Challengers IPL Cricket Team
Kingfisher Frequent Flyer Program
19
Extensive Network Providing the Widest Domestic Reach
70 destinations66 aircraft
Market Share Evolution%
44
12
15
2
27
1
75
100394 flights a day%
11
5
7
1850
75
AI
3618
7
25JA
5
2212
0FY 2005-06 January 2010
KFA Air Deccan Jet Airways
KFA
20
Jet Lite Air India Alliance AirGo Air Spice Jet IndigoParamount
Source: DGCA
Performing well on operating parameters
Key Operational Analysis KFACurrent Fleet (Dec’09) 61Average Fleet Age (yrs) 3.0
Employees per Aircraft 115*Market Share (Jan’10) 22.2%
Average Seat Factor (Apr-Dec’09) 70.2%
RASK (Apr-Dec’09) 3.58CASK (Apr-Dec’09) 3.88
Unionized NoNo
Legacy Govt. Ownership No
Customer Satisfaction Skytrax-5 star
Notes(1) All metrics are for domestic operations only(2) Market Share is basis DGCA report for Jan ‘2010
21
(2) Market Share is basis DGCA report for Jan 2010(3) RASK is Passenger Revenue per ASK; CASK is EBITDA cost per ASK(4) ASKMs are basis the DCGA monthly reports(5) * Employees/AC numbers are for Domestic + International ops, based on Q3 FY10 declared numbers
Source: DGCA and Published financials
Uniquely Flexible Fleet to Aid Market Based Deployment
Current Fleet Description Projected Delivery Schedule
Fleet Type # Aircraft
Airbus 319 3
Airbus 320 23
Fleet Type # A320 # A330 # A350/380 Total
2011 - - - 0
2012 6 4 - 10
Airbus 321 8
Airbus 330 5
ATR 72 25
2013 9 3 - 12
2014 7 4 2 13
2015 8 4 6 18
• Fleet Strategy
ATR 42 2
Total 66
2016 12 0 2 14
Total 42 15 10 67
– Airbus A 320 fleet in multiple configurations ( Single & Dual ) to aid a “map to market” capability
– ATR fleet to leverage growing underserved & underdeveloped markets
– Competitive A 330 aircraft designed with unique KF specs to create the “best product in the sky” for international
22
– Competitive A 330 aircraft designed with unique KF specs to create the best product in the sky for international
medium & long haul operations
Leverage Strengths in Engineering & Maintenance
Key Industry Standard• ISO certification- twice a year audit done by BSI Management system, India, a subsidiary
Key Industry Standard Certifications
Fleet Management Capabilities for
of British Standards Institute• IOSA certification- 3 Audits (KF standalone, DN standalone, KF & DN combined)
• Self management of entire NSOP fleet – B727 / HS125 / Helicopter EC 155Capabilities for Specialized Purposes
High Operational Reliability and Safety
• Total care support to Reliance ACJ (VVIP Aircraft)
• First organization to receive approval under CAR 145• Highest operational reliability of A321 fleet in world fleet & one of the best technical Reliability and Safety
Management
Foreign Regulatory
g p ydispatch reliability in A320 family fleet
• Safety management system is built into E & M policies through MOE & QMS
• Approvals obtained from Civil Aviation Authority of Singapore (CAAS), Qatar Civil Aviation Authority (QCAA) Civil Aviation Authority of Srilanka (CAASL)g g y
Approvals
Third Party Handling Support at Indian
Authority (QCAA), Civil Aviation Authority of Srilanka (CAASL)• Approvals in process: General Civil Aviation Authority (GCAA-UAE), EASA
23
Support at Indian Airports
Section 2
India Aviation Market
24
Most Attractive Aviation Market in the World
Historical domestic passenger CAGR of 20%...
…Aviation traffic in India amongst lowest in
…Enabling conditions would ensure continued growthCAGR of 20%...
BRIC countries…ensure continued growth
50 0 25
• Economy expected to continue to grow at 7% – 9%
Growth of Indian Aviation Industry Aviation Traffic Penetration in BRIC Countries
35.8
44.4
39.4
45.1
30.0
40.0
50.023
15
20
25 • Ministry of Civil Aviation envisages creating infrastructure to handle 280 MM passengers by 2020
CAGR of 20% since FY 2004
15.7
19.4
25.2
10.0
20.0
30.013
45
10
15
• Indian Middle Class to reach 50% of India’s population at 600 MM by 2025
0.0
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10E
Annual domestic pax traffic (Mn)
4
0
5
Brazil China IndiaNo. of domestic passengers per 100 people
25
KPMG expects India’s air traffic to grow 2 – 3 times by 2012
Source: KPMG, MOCA, CAPA, McKinsey Global Institute
Highest Growth Aviation Market in the World
Europe7 9%
CIS8.7%
7.9%
Middle East
North America10.5%
11 5%11 5%
Asia-Pacific7.4%
7.2% 11.5%11.5%
Africa8.3%8.3%
India
2007-2016 2017-202620-year
World
2007-2016 2017-202620-year
26
2007 2016 2017 2026growth
9.7% 6.4% 8.0%
2007 2016 2017 2026growth
5.4% 4.4% 4.9%
Source : Airbus Estimates
Massive Infrastructure Investments Supports Growth
Massive Airport Investments Non-Metro Airports Identified for Upgrade and Modernisation• Over next 5 years, Airports Authority of India
has planned an investment of US$3.1 Bn
Government policy support for Infrastructure
• 100% FDI under automatic route is permissible
Modernisation
JammuAmritsar100% FDI under automatic route is permissible
for green field airports
• Private developers allowed setting up of captive airstrips and general airports 150 km. away from an existing airport
ChandigarhDehradun
AgraJaipur
AhmadabadUdaipur
Bhopal
Lucknow
Patna
ImphalAgartala
GuwahatiDimapur
Varanasi
Khajurahoaway from an existing airport
• 100% tax exemption for airport projects for a period of 10 years
• The Government is also planning to develop
Ahmadabad
Rajkot Vadodara
Pune
Aurangabad
Indore
Vizag
Nagpur Raipur
RanchiKhajuraho
Bhubaneswar
around 300 unused airstrips Goa
Mangalore
TrichyMadurai
Trivandrum
CoimbatoreAgatti
Port Blair
27Source : CAPA
Land Constrained Airports Unconstrained Airports
Move Towards a Rational Supply Environment
Avg. Monthly Seats OfferedIndustry (MM)
Seats Offered Industry (MM) H o H ∆
6.1
5.96.0
6 0
6.5
Industry (MM) Industry (MM) H-o-H ∆
2H 2008 4%
1H 2009 (16%)
2H 2009 3%
5.65.5
5.8
3
5.4
5.25.3
5.2
5.5
5 4
5.5
6.0
5.3
4.95.14.95.1
5.35.3
4.8
5.4
5.2
5.05.0
4 5
5.0
4.6
4.0
4.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
28
CY08 CY09
Source : MOCA Website, PIB press releases
Government Policies Present Upside…
• Expected change in Government policies & in macro-economic environment would result in lower operating costs for the industrylower operating costs for the industry
− ‘Declared Goods’ status for ATF would result in lower uniform taxation of 4% on fuel
− Escalation of airport costs at private airports expected to be charged as UDF from consumers. No p p p p g
escalation foreseen for AAI airports, given the recent hikes in 2009
− Removal of expat pilots by July 2011 as per Government guidelines across Industry
29
…And There Is Reason to be Optimistic The big three players– Kingfisher Airlines (23%), Jet Airways + JetLite (25%) and Air India (18%) are critical to the Indian economy (4)
• $14bn + aviation industry is similar in size to Indian railways ($18bn)
• Creates substantial impact on other allied industries – Tourism, Hospitality, Banking– 4.5% of global GDP is attributed to the air transport component of civil aviation (1)
Impact on indirect industry is estimated at 1 1 5 times size of aviation industry (2)– Impact on indirect industry is estimated at 1-1.5 times size of aviation industry (2)
• Improved connectivity results in higher GDP growth– $100 spent on air transport produces benefits worth $325 for the economy (1)
– Improves economic productivity of passengers (estimated at 50% of ticket prices) (3)
• Creates significant employment potential – Direct ~ 100,000– Indirect ~ 6 times (1)
30
Notes1) Naresh Chandra Committee Report2) Port Authority report on New York aviation market3) IATA report4) YTD FY10 market share
Indian Aviation – The Way Forward
• The economy continues to show signs of recovery with GDP growth estimates climbing back
Favourable Economic Outlook
y g y g gover 7%
• Passenger traffic has firmed up in Q4 and is expected to grow by > 15% in the coming year as per CAPA estimates
• Premium traffic has also seen a comeback and growth is expected to continue
Better Demand-Supply Match
• Industry capacity is more aligned to demand after a series of sharp cuts in the early 2009, and capacity induction in the current year is expected to be <10 % as per CAPA estimatesYi ld i i d i Q3 d i i h i f h
pp yShould Improve Yields
• Yield improvements witnessed in Q3 are expected to continue given the narrowing of the demand supply gap. CAPA expects domestic yields to improve by 5-7% in 2010-11 and as high as 10% in Q3 of next year
Pricing and Policy Matters
• Rational pricing is expected from industry, going forward• Government is re-evaluating policies which might benefit industry – ATF taxation, FDI
norms, RDB guidelines
31
, g
Section 3
Recent Performance and Continued Initiatives
32
Kingfisher Has Actively Rationalized and Restructured Capacity…
Second round of capacity
KFA Capacity Trend
rationalization to balance demand supply
First mover to rationalizeindustry capacity
Shift of capacity towards KFR to address the tough market requirements
33
• KFA decreased capacity by 25% in the domestic market in Summer 2008 to rationalize industry capacity• Capacity was further rationalized by 13% in June 2009 to balance demand and supply in a tough economic environment• KFR contribution to total capacity increased from 40% to 65% to address the market requirements
…And Has a Well Calibrated Plan for its International Operations…
KFA adopted a cautious approach to international operations due to the prevailing economic conditions:conditions:
– Did not initiate Ultra-long haul A340 operations - sold out the Aircrafts
C ti l d l d th A330 t LHR SIN d HKG k t t b ild ti i t k– Cautiously deployed the A330s to LHR, SIN and HKG markets to build operations into key markets from India, along with potential alliances with other global carriers - a step towards joining a global alliance
Have identified lucrative short haul markets BKK DXB CMB KTM & DAC and deployed– Have identified lucrative short-haul markets - BKK, DXB, CMB, KTM & DAC - and deployed narrow body capacity of existing aircraft to enhance utilization
– Future capacity deployment plans include increase of frequency to these destinations by further exploiting narrow body fleetexploiting narrow body fleet
– Currently KFA has an option to purchase 4 A 330s every year from 2012, the decision for which would be taken closer to date, given the operating environment
34
…Which is Improving Operating Performance
Improvement in Overall Seat Factors of KFA
Rising Yields as Seen in KFA’s Domestic ATV
Uptick in KFA’s Domestic Revenue (RASK-Fuel CASK)
80
85
%
7,000
KFA ATV Trend – ATV (INR)( )
RASK (in Rs.)
3.0
3.5
70
75
80
5 000
6,000
2.0
2.5
65
70
4,000
5,000
1.0
1.5
55
60
an-09
Feb-09
Mar-09
Apr-09
May-09
un-09
Jul-0
9Aug
-09ep
-09Oct-
09Nov-0
9Dec-0
9
3,000
Jan-0
9Feb
-09Mar-
09Apr-
09May
-09Ju
n-09
Jul-0
9Aug
-09Sep
-09Oct-
09Nov-0
9Dec-0
9
0.0
0.5
AprMay Ju
n Jul
Aug Sep Oct NovDecJa
nFeb Mar
35
Jan
Feb Ma ApMay Ju
n Ju Aug Sep Oc No Dec
SF
J F M A M J J A S O N D
KFC KFR Total2008–09 2009–10
Improvement Reflected in Y-o-Y Results…
Apr 09 - Dec 09(Rs. Cr)
Apr 08 - Dec 08(Rs. Cr) Variance %
INCOMEINCOME
Operating Revenue 3,776 4,168 -9%
Non Operating Revenues 43 16 +169%
Total Revenues 3,819 4,184 -9%
EXPENDITUREEXPENDITURE
Employee Remuneration & Benefits 531 620 -14%
Aircraft Fuel Expenses 1,319 2,267 -42%
Other Operating Expenses 1,484 1,739 -15%
EBITDAR 485 (442)
Aircraft Lease Rentals 840 900 -7%
Total Operating Expenditure 4,175 5,526 -25%
EBITDA (355) (1,342)
Depreciation 156 125 +25%
Interest 818 529 +55%
Total Expenditure 5,149 6,180 -17%
Loss before exceptional items and Tax 1,29 1,996 -33%
Exceptional Item 300 (459)
Provision for taxation (554) (482)
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Provision for taxation (554) (482)
PROFIT / (LOSS) AFTER TAXATION (1,075) (1,055) +2%
With This Stringent Cost Focus, Kingfisher Has Emerged as the Lowest Cost FSC in the Current Year
Cost Comparison (Apr-Dec FY10)KF
Cost DetailsKF
Rs. Cr Adjusted CASK (1)
Fuel Cost 1,102 1.24
Non-Fuel Cost 1,920 2.08
Emplo ee 472 0 48 (1)Employee 472 0.48 (1)
S&D 408 0.46
Other 1,041 1.14 (1)
EBITDAR Cost 3,021 3.32
Lease Cost 665 0 68 (1)Lease Cost 665 0.68 (1)
EBITDA Costs 3,441 3.72
Depreciation/Amortization 156
EBIT Costs 3,598 3.88
ASKM (Mn) 8 860 9 760 (1)ASKM (Mn) 8,860 9,760 (1)
ASL 803
Seats/Flight 110
37
NotesCosts include domestic operations, and include reversals undertaken in respective time periods(1) Adjusted CASK refers to estimated CASK at higher capacity for full fleet operations for Apr-Dec FY10 ( assuming no grounding of aircrafts)
Kingfisher’s Multi Pronged Cost Reduction Initiatives Are Expected to Further Reduce its Costs
Reduced Costs in 2010-11
• Focus on reviewing distribution channels and costs to reduce S&D costs to 8% of revenue– New IBE geared towards increasing website sales
• Overall S&D cost and achieving a cost of < $4 per RPB, by restructuring CRS/GDS contracts and increasing direct web
Rationalizing Distribution Channels
Overall S&D cost and achieving a cost of $4 per RPB, by restructuring CRS/GDS contracts and increasing direct web share
• Additional fuel discounts• E&M costs with new vendor (Air France)• In-flight & Catering costs through change in menu and additional volume discounts• Renewal of operating leases at 20% discount to existing lease
Renegotiating Vendor Agreements
• Reduce Rentals, costs of Transportation and local Conveyance, Communication− Consolidate and optimize space (warehouses, offices, call centers)− Increase effectiveness of spends and increase barters to reduce Marketing costs
Control Discretionary Spend
• Reductions in employee cost through sizing manpower with capacity • Replacement of high cost expat pilots in narrow body fleet• Reduction in excess AMEs/ ATR expat
Head Count Rationalization
• Reduce fuel consumption to less than 3,000 Ltr/BH for A320 and 750 Ltr/BH for ATR operations through targeted reviews
38
p , p g g• Target E&M spend reduction (in-house C-checks, controlled redelivery)Operational
Efficiency
Summary of Seabury’s Mandate and Plan
Focus areas for Seabury include
• Draft 5 year business plan basis current operating dynamics
• Review all areas of operations
• Review fuel consumption process
• Implement leading practices in revenue management• Implement leading practices in revenue management
• Review and help restructure Sabre contracts
• Review network strategy with focus on profitability
• Benchmark aircraft lease rentals and maintenance reserves to the best
39
• Evaluate profitability of ATR fleet
Further Market Share Opportunities
• Enhancement of day return product across key primary and secondary sectors
• Incremental passenger connections generated through launch of ‘One Stop Connect’ campaign
Increased presence thro gh e pansion of inter line agreements and e al ation of global• Increased presence through expansion of inter-line agreements and evaluation of global alliances
• Increased ancillary revenues through launch of cargo operations (Kingfisher Xpress)
• Strengthened loyalty through enhanced FFP program
• New Internet booking engine driving greater consumer traffic towards online bookings
• Leverage international POS to stimulate demand in key South East Asian markets
40