Group : 4

Group Members : Akshay Prerna Nikita Aanchal Ankit Group Members : Issu Surbhi Jayant Ravi Yedu

Indian Aviation Industry

One of the fastest growing aviation market More and more middle class families now prefer air travel to traditional rail travel The Indian travel market is expected to triple to $51 billion in 2012 from $16.3 billion in 2005-06

AAI totally manages 127 airports: Includes 13 international airports 7 custom airports 80 domestic airports 28 civil enclaves
By 2020, Indian Airports are estimated to handle 100 million passengers, including 60 million domestic passengers.

ABOUT KINGFISHER AIRLINES

Kingfisher Airlines started its 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 Indias Favorite Airline. Indias 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

MALLYAS CO. WHICH BOUGHT STAKE IN DECCAN AIRLINES

LOW COST DECCAN CONCEPT- KINGFISHER AVATAR

AND SOON.

AIR DECCAN CEASED TO EXIST

AND KINGFISHER BECAME SYNONYMOUS TO LUXURY AND CLASS.

GROWTH STORY

In the good times

The growth story

2003 Kingfisher established 2005 Inaugural flight Major competitors 2006 kingfisher = Five star travel In-flight entertainment Talks held with Air Deccan

 2007 17.5 million passengers,41 aircrafts, 255 flights Acquired Air Deccan Income `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 nations 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 In dias 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 countrys 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. Kingfishers 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 los ses 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 nonperforming 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 didnt 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 MALLYAS 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, Kingfishers 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 KFAs debt column

WHAT WENT WRONG

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.

Mallya kept the business under his direct control instead of hiring a team of expert CEOs. 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 AIRLINES

Deal 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

Will FDI really Help??

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

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

Thank You