‘ASynopsis on " Merger and Acquisition Analysis of King Fisher Airlines and Decan merger * Submitted to School Of Commerce and Management Yashwantrao Chavan Maharashtra Open University Nashik. In partial fulfilment of the Requirement for the award of the degree of Master of Business Administration (MBA) By Miss Shaikh Shabnam Bano A Kalam PRN No, 2020017001952301 Under the Guidance of Dr. Sudhakar tyer Through The Coordinator Study centre code:-3503AYashwantrao Chavan Maharashtra Open University, Nashik )) Dnyangangotri, Near Gangapur Dam, Govardhan, Nashik 422 222 Contact — (0253) 2231477,2231715, 2231714 Fax (0253) — 2230470 E-mail : registrar@ycmou.digitaluniversity.ac Ref. :YCMOU/SC&M./202 / fare: = / 20 To, The Principal/Coordinator YCMOU Study Centre batkh ghobnan. £00 kate n Subject : MBA Synopsis. Dear Student, This has reference to your MBA Synopsis received through your Study Centre for evaluation. In this regards this is to inform you that, your MBA Synopsis is evaluated by the expert and is approved with suggestions. Kindly revise your synopsis as per the suggestions given by the expert and prepare your final project report accordingly. Now you can submit your Project Report as per university guidelines at your respective study centre for further process latest by 10” March 2022 for the result to be declared with exam event May / June 2022. Kindly follow University guidelines for preparing & submission of project report for successfully completing the course You need to attach approved copy of Synopsis and Pro-forma in the Project Report without which project will not be accepted. Enclosed herewith pre-receipt bill which you need to get it duly filled & signed from your supervisor and submit it along with your proj Best of Luck !!! ‘eport at your study centre. Director School of Commerce & Management Encl : 1. Approved with suggestions Pro-forma of synopsisYashwantrao Chavan Maharashtra Open University Nashik ‘School of Commerce & Management Yashwantrao Chavan Maharashtra Open University MBA - General (P79) SEranah Dnyangangotri, Near Gangapur Dam, Nashik 422222 TMP: TARE BACK TO BACK PRINT OF PROFORMA FOR APPROVAL OF PROJECT PROPOSAL [P79 PRI] PROFORMA FOR APPROVAL OF PROJECT PROPOSAL [179 PRJ] (USE CAPITAL LETTERS ONLY) prano. (2 |0]2 Jou ol: [tlolols [also {aloli Name of the Student; GSHATKH SHAQNAM SAQA __KALAM Contact No; ONE CEAIAY maid: sSinapnamarei(a qmail: foe __ Siugy come Namese code: OTBLA (OUEWE WALYANl —_ sudy cone Code: 210.3 Fiteotterniecr MERGER ANN _ACQUTETT TaN _AWALSTS KE Od Dee qe Name ofthe Supervisor, DY SUDHAKAR THER For office use only ‘SYNOPSIS .. e + 4 Submission Renee Submission| Submission | Submission EUEESSTOR Approved. . “Approved with | Seas we suggestions Not Approved Not Approved Reason for nor Date & Sign |psie5! 1 og te slosh tee) Date & Sign of 0). of Evaluator | @9—~* Evaluator = roan te Reason for Not Approval Reframe 2 zs 3 Submission |" Submission ‘Submission | Submission [Tite ‘Objectives iy Hypothesis which can be tested Research Methodology ‘Objectives! Hypothesis not in line with title University Guidelines not followed Date & Sign of Evaluator * ‘Suggestions for Reformulation G_Befwume “litle of the Project» * A Stussy of —-—=) ty etoy mulate biectives = Ad. Lorn 2c nn a n* objective Gs Retorina) oBe Statement of _hanothesis —in_ling soit Avie & obdectives ol Ne- stuay - Gy Pevrmte Rescurth Methodslogy s- Specify scoPe, SamPle Sire, hecknique Bode omaysis petbods. tes © petormdate Chapter scheme a5 PeY Verio Guiieline faa - lidercdave vevied chapter poesia emt/ ‘qe Dnyangangotri, Near Gangapur Dam, Nashik 422222 Yashwantrao Chavan Maharashtra Open University Nashik School of Commerce & Management ‘Yashwantrao Chavan Maharashtra Open University MBA - General IMP: TAKE BACK TO BACK PRINT OF PROFORMA FOR APPROVAL OF PROJECT PROPOSAL [P79 PRI] (USE CAPITAL LETTERS ONLY) prno. [210121010]. | 4) 0]0]1 1915 ]2] 31e 11] 1) Name and Address of the Smdent: GHATK HARM BH y & PTRAS if ATW AL Pin code:__442\202. Contact No.:_A1G 2 ER 1144, @ @ to © Email id: ¢SbabQama2i @ Gmail - Com, — ‘Subject Area: Finance/Human Resource Management/ Marketing Management / Manufacturing Management Name and Address _ DS. SUDHAKAR Te @ of the Supervisor Bmait: Gudlhakari yee es eupaen (oAContact No.: ASE ASAS 312. Is the Supervisor an Academic Yes: Counsellor of the Management Programme of YCMOU If Yes, Name of Study Centre and the courses /he / she is counselling for and since when: Date:31 0202) Date:3 | 07202.) Please do not forget to enclose the synopsis ofthe project and the Bio-data of the Supervisor.‘ASynopsis on " Merger and Acquisition Analysis of King Fisher Airlines and Decan merger * Submitted to School Of Commerce and Management Yashwantrao Chavan Maharashtra Open University Nashik. In partial fulfilment of the Requirement for the award of the degree of Master of Business Administration (MBA) By Miss Shaikh Shabnam Bano A Kalam PRN No, 2020017001952301 Under the Guidance of Dr. Sudhakar tyer Through The Coordinator Study centre code:-3503AL.INTRODUCTION TO MERGERS & ACQUISITIONS Ina general sense, mergers and acquisitions are very similar corporate actions -they combine two previously separate firms into a single legal entity. Significant operational advantages can be obtained when two firms are combined and, infact, the goal of most mergers and acquisitions is to improve company performance and shareholder value over the long-term. The motivation to pursue a merger or acquisition can be considerable; a company that combines itself with another can experience boosted economies of scale, greater sales revenue and market share in its market, broadened diversification and increased tax efficiency. However, the underlying business rationale and financing methodology for mergers and acquisitions are substantially different. A merger involves the mutual decision of two companies to combine and become one entity; it can be seen asa decision made by two "equals". The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting. shareholder values for both groups of shareholders. & typical merger, in other words, involves two relatively equal companies, which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts, In a merger of two corporations, the shareholders usually have their shares in the old company exchanged for an equal number of shares inthe merged entity. A takeover, of acquisition, on the other hand, is characterized as the purchase of a smaller company by @ much larger one. This combination of “unequal” can produce the same benefits as @ merger, but it does not necessarily have to be a mutual decision. A larger company can initiate a hostile tokeover of a smaller firm, which essentially amounts to buying the company in the face of resistance from the smaller company's management, Unlike in 2 merger, in an acquisition, the acquiring firm usually offers a cash price per share to the target firm's shareholders or the acquiring firm's share's to the shareholders of the target firm according to a specified conversion ratio. Either way, the purchasing company essentially finances the purchase of the target company, buying it outright for its shareholders. Inthis context, twould be essential for us to understand what corporate restructuring and mergers and acquisitions are all about2.IMPORTANCE OF MERGER AND ACQUISITION IN INDIA ‘The term merger and acquisition has been used interchangeably, however, the two are different Mergersis the combination of two companies to form one, while Acquisitions is one company taken over by the other. Acquisition can be friendly Merger or Hostile Merger. There are two ways of growing as follows: 1. Organic growth and 2.tnorganic growth. Organic growth: It the type of growth whereby a company grows internally by its own efforts and performance Inorganic growth: here comes the role of external factors and means such as a merger, acquisition, and takeover ete. Altogether the Mergers and acquisitions is a cambination of two companies in the form of Merger, Acquisition, Consolidation, Tender offers, purchase of an asset, Management acquisition. s.Objectives i. To understand the current trends in the Mergers and Acquisition Markets, ii, Tounderstand the employees perceptions towards Mergers and Acquisitions. ii, To get the views of different professional advisors on the Mergers and Acquisitions market. Iv, To understand some of the major Mergers and Acquisitions of the decade in the Indian markma}. 4.Hypotheses Assuming that the Investment Opportunity Hypothesis and the Risk Sharing Hypothests hold, the major implication would be that stock transactions no longer have to be considered as a bad signal by the market participants. This stands in contrast to the classical models by Myers/Majluf 1984) and Jensen (1986}. It would, however, not stand in contrast to the rise in the number of stock transactions observed over the past years. This subsequent rise in numbers of stock transactions would be consistent with the change in perception of the information content of stock transactions s.Research methodology ‘The project is divided into two parts. The first part ofthe project deals with Mergers and Acquisitions as 2 concept on 2 whole, | have researched about the basic knowhow of Mergers and Acquisitions, the history ofthe industry and the present state by using secondary data, The first part of the project is descriptive study giving an overview of the Mergers and Acquisitions. The first part,of the project is collected through secondary data obtained from the internet, newspaper, magazines whereas the second part of the project relating to the Trends in Mergers and Acquisitions and the analysis of the M&A Market in Incia and the senior executives perception of Mergers and Acquisitions is covered using primary data, PRIMARY AND SECONDARY DATA Both primary and secondary data are required in this study, Primary data is the first hand information collected directly from respondents, The tool used here is questionnaire. Primary Data is collected through surveys conducted among existing executives and employees working in todays Global Work Environment, including some top level executives from some of the big MNCs functioning in Gurgaon, The survey process involved two phases: First phase included identification and selection of the target audience to be studied and to determine the parameters on which respondents will justify their preferences. A questionnaire was designed to collect the needed information from the respondents. The Second Phase involves collection of the primary data by making the respondents fill up questionnaires, Limitations of the study Every researchisincomplete without its own limitations. in this research too there were some limitations, They ar i. Results arejust an indication of the present scenario and may not be applicable in the future, Ti, As the study was conducted only in Delhi & NCR'so it can be said that the study has a regionally biased, li, Since sampling was done under the simple random sampling method, where easily approachable respondents were picked up. So this may not represent the whole universe. iv. The size of the sample is small i.e Expected Contribution ‘This project will help to assess the financial health of the organization. It will put some light on the financial position of the kingfisher airlines and air decan for the given period. It will show the areas where organization must reduce its cast to enhance its profitability. It will help the organizationin financial decision making by pointing our critical areas for cost saving. Itwill also help the organization in optimum utilization of its resources. The study may help the organization to enhance its profitability further 6.Chapterisation Chapter- | : Introduction Chapter- Il: Theoretical Background Chapter_Ill: Industry Profile Chapter- IV; Data Presentation and Analysis Chapter- V Findings, Conclusions and Suggestions BibliographyFACULTY GUIDE: PROF.DEEKSHA SINGH KUMAR SUBMITTED BY: VED PRAKASH TIWARI 10BSP0052ACKNOWLEDGEMENT The success of this final repor provided by all the concerned without whom the report could not fide on the right back, the outcome of Guidance and valuable suggestions I would like to express my sincere gratitude to Prof.Deeksha singh kumar and ICFAI, GURGAON for giving me an opportunity to do this project work. express my sense of deep gratitude to faculty of ICFAI, GURGAON for her inclusions and timely suggestions in the preparation of this final report. Finally, | will be failing in my duty, if | do not thank my parents, friends and well wishers for their enthusiastic support and who have directly or indirectly helped in some way or the other in making this final report a success.TABLE OF CONTENTS 1. Abstract 2. Introduction of industry 3. Summary of the study 4, Concept of merger and Acquisition 5, Reverse merger 6. Distinction between mergers and acquisitions ‘8. Deccan Aviation Limited - A Review 9. Kingfisher & Air Deccan Merger ~ Key Features 10. Merger Advantage 11.Synergies 12. Question on working 13,Bibliography ABSTRACT 12 13 14 15 16 17 19Project report is part of the PGPM Program. The objective of a Project report is to train the student in designing and implementing a research project in respect of a business problem. A Project report is the culmination of training provided to the student on practical applicability of the theoretical concepts learned by them. In this study we look at the options of experiential learning and embedding to the skills and how the organization get the accreditation from its training course and develop the employee exactly and smartly using applying different models like 360° feedback, training by telephone, group training, mind mapping, perceptual awareness etc. Training is essential to order to understand how to implement the core principle of coaching and learning. Most of the people attracted up to the profession or precisely the ‘once who are likely to make good trainers. People with integrity like helping other and enjoy making different others. Experiential learning and embedding skills is an action oriented behavioral situation. The purpose of the action situation is to have participants generate their own data about each of the key concepts to be studied To get the best from experiential learning and embedding skills method, the trainer must be a good observer of behavior. When the groups start to examine its experiences and reflect upon them, he is in a position to assist with this process. His responsibilities in focusing learning, and making it clearer for each participant, are extremely important INTRODUCTION-About Aviation IndustryIndia is one of the fastest growing aviation markets in the world. The Airport Authority of India (AAI) manages a total of 127 airports in the country, which include 13 international airports, 7 custom airports, 80 domestic airports and 28 civil enclaves. There are over 450 airports and 1091 registered aircrafts in the country. The genesis of civil aviation in India goes back to December 1912 when the first domestic air route between Karachi and Delhi became operational. In the early fifties, all airlines operating in the country were merged into either Indian Airlines or Air India. And, by virtue of the Air Corporations Act 1953, this monopoly continued for the next forty years. The Directorate General of Civil Aviation(DGCA) controlled every aspect of aviation, including granting fiying licenses, pilots, certifying aircrafts for flight and issuing all rules and procedures governing Indian airports and airspace. Finally, the Airports Authority of India (AAI) was assigned the responsibility of managing all national and international airports and administering every aspect of air transport operation through the Air Traffic Control. Competitive landscape The air transport services offered are the: Scheduled Air Transport Services (Passenger) Non- Scheduled Air Transport Services (Passenger) + Air Transport Services (Cargo + Non-Scheduled Air Transport Services (Charter Operation) ASTUDY OF MERGERS BETWEEN KINGFISHER AIRLINES AND DECCAN AIRLINES1s kingfisher is still the King of Good times? The Merger/Acquisition Summary Style: Friendly Company Status: Public Intention: Opportunistic Purpose: Defensive Predictability of Value: Calculative Strategic Mode: Development Management Change: Incremental evolution. The Deal: Vijay Mallya paid Re 550 Cr to acquire 26% equity in Deccan. Subsequently, he paid an additional Rs 418 Cr for a further 20% stake through an open offer. Enterprise value: Rs 2,115 Cr when Mallya acquired 26% Market Share of Air Deccan: 18% Fleet with Air Decean: 43, Combined market share: 20% ‘Share bought at 2007 was RS.155/share cMP=t 's48/share (2009) Mergers and acquisitionsThe phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. Acquisition An acquisition, also known as a takeover or a buyout, is the buying of one company (the ‘target’) by another. Merger is when two companies combine together to form a new company alltogether. An acquisition may be private or public, depending on Whether the acquiree or merging company Is or isn't listed in public markets. An acquisition may be friendly or hostile. Whether a purchase is perceived as a friendly or hostile depends on how it is communicated to and received by the target company's board of directors, employees and shareholders. It is quite normal though for M&A deal ‘communications to take place in a so called ‘confidentiality bubble’ whereby information flows are restricted due to confidentiality agreements (Harwood, 2005). In the case of a friendly transaction, the companies cooperate in negotiations: in the case of @ hostile deal, the takeover target is unwilling to be bought or the target's beard has no prior knowledge of the offer. Hostile acquisitions can, and offen do, tum friendly at the end, as the acquiror secures the endorsement of the transaction from the board of the acquire company. This usually requires an improvement in the terms of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. Another type of acquisition is reverse merger, a deal that enables a private company to get publicly listed in a short time period.‘A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets. Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful The acquisition process is very complex, with many dimensions influencing its outcome. There is also a variety of structures used in securing control over the assets of a company, which have different tax and regulatory implications + The buyer buys the shares, and therefore control, of the target company being purchased. Ownership control of the company in turn conveys effective control over the assets of the company, but since the company is acquired intact as a going concem, this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks that company faces in its commercial environment. + The buyer buys the assets of the tarcet company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. A buyer often structures the transaction as an asset purchase to “cherry-pick" the assets that it wants and leave out the assets and liabilities that it does not. This can be particularly important where foreseeable liabilities may include future, unquantified damage awards such as those that could arise from litigation over defective products, employee benefits or terminations, or environmental damage. A disadvantage of this structure is the tax that many jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-free or tax- neutral, both to the buyer and to the seller's shareholders. The terms “demerger”, "spin-off’ and “spin-out” are sometimes used to indicate a situation where one company splits into two, generating a second company separately listed on a stock exchange.Distinction between mergers and acquisitions Although often used synonymously, the terms merger and acquisition mean slightly different things. This paragraph does not make a clear distinction between the legal concept of a merger (with the resulting corporate mechanics - statutory merger or statutory consolidation, which have nothing to do with the resulting power grab as between the management of the target and the acquirer) and the business point of view of a "merger", which can be achieved independently of the corporate mechanics through various means such as “triangular merger’, statutory merger, acquisition, etc.] When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded In the pure sense of the term, a merger happens when two firms agree to go forwerd as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a “merger of equals”. The firms are often of about the same size. Both companies’ stocks are surrendered and new company stock is issued in its place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline, was created.In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proctaim that the action is a merger of equals, even if itis technically an acquisition. Being bought out cften carries negative connotations, therefore, by describing the deal euphemistically as 2 merger, deal makers and top managers try to make the takeover more palatable. An example of this would be the takeover of Chrysler by Daimler-Benz in 1999 which was widely referred to in the time. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition. Mergers and it's types and it’s form 10jerger Acquisition Kingfisher Airlines- A Review ceeKingfisher Airlines is a private airline based in Bangalore, India. Currently, it holds the status of India's largest domestic airline, providing world-class facilities to its customers. Owned by Vijay Mallya of United Beverages Group, Kingfisher Airlines started its operations on May 9, 2005, with a fieet of 4 brand new Airbus - A320, a flight from Mumbai to Delhi to start with. The airline currently operates on domestic as well as intemational routes, covering a number of major cities, both in and outside India. In a short span of time, Kingfisher Airlines has carved a niche for itself in the civil aviation industry. History Kingfisher Airlines proved to be a stiff competition for other domestic airlines of India, with its brand new aircraft, stylish red interiors, stylishly dressed cabin crew and ground staff. The airline introduced in-flight entertainment (IFE) systems, for the first time to Indian consumers. The IFE systems were provided on every seat, even on the domestic flights. The airline offers attractive services to its on board passengers. Years following its inception proved to be beneficial for the airline, in terms of its booming business, with a good track record of customer satisfaction. However, it faced a worsening economic scenario in 2008. Kingfisher was engaged earlier in the following businesses: ‘Scheduled Air Transport Services Scheduled Air Transport Services ‘Commercial Airline Business Ground handling services Training academy Merger Motive Vijay Mallaya had a vision. His successful Kingfisher Airlines had completed a merger agreement with low cost carrier airines Deccan Aviation on May, 2007. With this deal he planned to become the dominant low cost carrier in the country. Deccan Aviation Limited — A Review 12Deccan Aviation, promoted by Capt G.R. Gopinath, Capt. KJ. Samuel and Capt. Vishnu Singh Rawal, was initially incorporated as a private limited company on June 15, 1995 in Karnataka with the main object of pursuing chartered aviation services both for commercial and non commercial purposes in India and to provide all aviation related services. It was converted into a public limited company in 2005. The company's vision was "To empower every Indian to Fly” and its mission “To demystify air travel in India by providing reliable low cost and safe travel to the common man by constantly driving down the air fares as an ongoing mission’. As is evident from their mission statement, the strategy was to gamer market penetration through cost reduction Deccan was engaged earlier in the following businesses: Scheduled Air Transport Services Non -Scheduled Air Transport Services Scheduled Air Transport Services ‘Scheduled Air Transport Services ‘Commercial Airline Business Charter Services Operations Market Share Data Market share Data of Oct 2005 Airline Percentage Indian Airlines [28% Jet Airways | 35% AirSahara___| 12% Air Deccan | 11% King Fisher__| 6% Spice Jet 5% Others. 3% Total 100% Market Data of combined entity was 25% at 2007 Market data of Kingfisher on July 2009 is 22% Kingfisher & Air Deccan Merger — Key Features 13+ On 1 June 2007, the Board of Air Deccan approved the allotment of equity share of 26% to UB group & its nominees. The shares were allotted at Rs.155 per share approximately a 10% premium for the current market price (CMP). The UB group made the money in two phases: Rs.150 Crore as initial investment & Rs396 Crore at the on or before the end of June. + Once the investment process is complete, the UB group will become the single largest share holder in the Deccan Aviation Itd.. + UB group will make an open offer to acquire minimum 20% to all shareholders of Deccan aviation at a price of Rs.155, + The Kingfisher-Air Deccan group will be the largest domestic airline with a fleet of 71 aircraft including 44 Airbus aircraft and 30 ATR aircraft. This combined airline powerhouse will cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily fights covering the single largest network in India connecting 69 cities whilst taking advantage of unparallel synergy benefits arising from a common fleet of aircraft. + For the near future, Kingfisher will continue to serve the corporate and business travel segment while Air Deccan will focus on serving the low fare segment but with improved financial prospects for both carriers + Kingfisher Airlines and Air Deccan will, henceforth, werk very closely together to exploit the significant synergies that exist in the areas of operations and maintenance, ground handling, vastly increased connectivity, feeder services, distribution penetration etc. Kingfisher & Air Deccan- Merger Advantage 14+ The fresh equity capitel will allow the Deccan to pay the loans & to fund various infrastructure projects. + Reduction of cost by sharing infrastructure + The merger ensures that Kingfisher does not need to invest more in infrastructure or in spare planes, thereby reducing costs and increasing profitability. + The combined share of the two carriers will increase the Market share + As per the existing laws Kingfisher Airlines would not be able to operate on international routes until 2010. However Air Deccan would be eligible from the second half of next year as its five-year ceiling is coming to an end. Kingfisher & Air Deccan- Synergies Operational Synergies 15+ Kingfisher and Air Deccan have exactly the same fleet of aircraft, the same equipment in terms of engine, in terms of brakes and in terms of avionics. This provides 2 huge opportunity on saving in engineering and maintenance cost + The airlines will achieve perfect synergies in the backend (operations and maintenance, ground handling, vastly increased connectivity, feeder services, distribution penetration) while preserving the front-end and that will enable both Deccan and Kingfisher to be profitable. + Apart from ground handling synergies, there is a whole host of items where duplication is completely unnecessary and can now be avoided. Infrastructure Synergy + Kingfisher and Air Deccan will now be able to access ground infrastructure at 65 airports, of which more than 28 are common to both the set ups. + The new entity will have over 71 aircraft. Route Synergy + On the most lucrative of routes, New Delhi-Mumbai, that on its own accounts for more than helf of India's 33 million passenger traffic, the two carriers will now account for a total of 155 flights. + According to Dr.Mallya kingfisher is considering swapping or switching in coordination with each other to rationalize the fleet structure. Investment synergy * Both airlines have orders for about 90 aircraft currently placed with European aircraft major, Airbus Industries. + Kingfisher has placed orders for new aircrafts al higher prices as compared to Air Deccan. The alliance with Air Deccan may provide it the opportunity to renegotiate its rates with the manufactures thereby saving substantially. Are these Airlines Mergers working? The answer is probably NO. 16For two simple reasons: First Reason is Subjectivity: The business investor can’t resist such a glamorous business. The second Reason is objectivity: pricing pressure exerted by other low cast carriers (LCC) ‘Subjectivity: The business investor can't resist such a glamorous business. Glamour of the airlines: No industry other than film-making industry is as glamorous as the airlines. Airline tycoons from the last century, like J. RD. Tata and Howard Hughes, and Sir Richard Branson and Dr. Vijaya Mallya today, have been idolized. Airlines have an aura of glamour around them, and high net worth individuals can always toy with the idea of owning an airline All the above factors seem to have resulted in a "me too” rush to launch domestic airlines in India. Objectivity: Pricing Pressure Declining yields: LCCs and other entrants together now command a market share of around 46%. Legacy carriers are being forced to match LCC fares, during a time of escalating costs. Increasing growth prospects have attracted & are likely to attract more players, which will lead to more competition. All this has resulted in lower returns ‘for all operators Understanding the Competitive Landscape of Airline Industry The fundamental characteristics of competition in the airline market: 1. It's a capital intensive industry, 17With few scale efficiencies, Delivering a highly perishable product, Within a partly regulated infrastructure, Driven by powerful unions, Price elastic demand and Noepon Free market entry. Bibliography 1. "The Indian Express, June 01, 2007. 18PN OneRen “International Business Times, May 31, 2007. “The Hindu Business Line, June 21, 2007. “Www indiaaviation.aero, June 18, 2007 “www.expressindia.com, June 01, 2007. “www livemint.com, June 04, 2007 "Khaleej Times, June 11, 2007. “The Hindu Business Line, June 01, 2007 19