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PRESENTED BY:
    MANISH KUMAR
SCHOOL OF MANAGEMENT
    NIT ROURKELA
AGENDA
 History
 Current scenario
 Accumulated debt
 Consequence of crises
 Start of the crisis
 Payment problems
 Competitor analysis
 Swot analysis
 Conclusion
 Suggestion
HISTORY
 Kingfisher Airlines Ltd. (KAIR) is a private airline based
  in Bangalore, India.

 Owned by Vijay Mallya of United Beverages Group .


 Tag line- “FLY THE GOOD TIME”.


 Kingfisher Airlines started its operations on May 9, 2005,
  with a fleet of 4 brand new Airbus - A320.

 It started its international operations on 3 September
  2008 by connecting Bangalore with London.
Cont..
 Kingfisher Airlines is one of the only seven airlines
  awarded 5-star rating by skytrax.

 Kingfisher operates 400 daily flights with regional and
  long-haul international services.

 In May 2009,KFA carried more than 1 million
  passengers, giving it the highest market share among
  airlines in India.

 Until December 2011,KFA had the second largest share
  in India’s domestic air travel market.

 First Indian Airlines to have in flight entertainment
  systems on every seat with guest being able to watch TV
  in flight.
CURRENT SCENARIO
 The DGCA suspended its flying license on
  October 20,2012.
 KFA has temporarily shut down its operations .
 Due to financial problem it has reduced the fleet
  from 63 to 16.
FINANCIAL CRISIS
 The Kingfisher Airlines financial crisis refers to a series of
  events that led to severe disruptions within Kingfisher
  Airlines.

 Ever since the airline commenced operations in 2005, it
  has been reporting losses.

 After acquiring Air Deccan, Kingfisher suffered a loss of
  over 1,000 crore for three consecutive years.

 By early 2012, the airline accumulated losses of over
  7,000 crore.
CONSEQUENCE OF CRISES
 Its half of its fleet grounded.


 Salaries delayed.


 Several members of its staff going on strike.


 Kingfisher's position in top Indian airlines on the
  basis of market share had slipped to last from 2
  because of the crisis.
START OF THE CRISIS
 The start of the crisis was the freezing of the bank
 accounts of the airline by the Income Tax
 Department.

 As on 10th Jan 2012, Kingfisher Airlines has
 service tax arrears of 60 crore.

 KFA has not been depositing service tax collected
 from passenger with the department since
 November 2011 on regular basis and instead has
 been diverting it for other purpose on regular
 basis.
ACCUMULATED DEBT
 KFA has a debt of Rs 8030 crore.


 KFA has been loosing money from day one and
 has accumulated losses around RS 8000 crore.

 Cumulative due exceeds Rs 15000 crore.
PAYMENT PROBLEMS
 Kingfisher Airline has staff strength of 6,000 and
 spends 58 crore on salaries a month.

 Airlines delayed salaries of its employees in
 August 2011, and for four months in succession
 from October 2011 to January 2012.

 Kingfisher also defaulted on paying the Tax
 Deducted at Source from the employee income to
 the tax department.
Conti…
 HPCL: In Jul 2011, Hindustan Petroleum Corporation
  Limited (HPCL) stopped the fuel (ATF) supplies for
  about two hours to Kingfisher airlines owing to the
  non-payment of dues.

 Bharat Petroleum Corporation in 2009 had filed a
  case against Kingfisher airlines for non-payment of
  dues(250 cr).

 Since 2008, it has been reported that Kingfisher
  Airlines has been unable to pay the aircraft lease
  rentals on time.
Cont…
 Kingfisher received a notice from the Airports Authority of India on
    February 2012 regarding accumulated dues of 255.06 crore.

 Kingfisher Airlines had not paid some bankers (Lenders) as per the Debt
    Recast Package (DRP) with lending banks.

 By Feb 2012, Kingfisher has been declared NPA (Non-performing
    asset) by following banks
   • SBI
   • Bank of Baroda
   • PNB
   • IDBI
   • Central bank
   • BOI
   • Corporation Bank
BALANCE SHEET
10000

 8000                                       7651.81
                                 6314.96
              5868.07                      5823.91
 6000                              5289.34
                       4734.62
 4000             5822.37 4747.51                     INCOME
                                                      EXPENDITURE
 2000 1569.9                                          PROFIT
          1781.46
    0
        FY 08     FY 09    FY 10    FT 11    FY 12
-2000                                -1027.4
          -188.14 -1608.83 -1647.22             -2328.01

-4000

   SOURCE: MONEYCONTROL
COMPETITOR ANALYSIS
ATTRIBUTES          KINGFISHER        JET AIRWAYS           SPICE JET


Price               25% higher than   Lower than            Extremely low
                    jet               Kingfisher airlines
                    Airways and
                    Indian
Permission to fly   NO                YES                   NA
to US

Permission to fly   YES               YES                   NA
to UK

IPO                 Floated           Floated               Floated


Targeted            Both ends of      Both ends of          Lower end of
Customer            customer          customer              customers

Positioning         Premium           Premium               Lowest fares and
                    Domestic          Domestic              no
COMPARISION WITH
COMPETITOR
            INCOME(CR   EXPENSES(   PROFIT(CR)   TOTAL
            )           CR)                      ASSET(CR)


KINGFISHE   5823.91     7651.81     -2328.01     2947.61
R


JET         15477.39    13369.66    -1236.10     12048.61
AIRWAYS


SPICE JET   4019.11     4541.62     -605.77      708.20



CONTAINER 4377.49       3037.22     877.88       5606.43
CORP
SOURCE:MONEYCONTROL
COMPARISION WITH
COMPETITOR
              FACE        LAST SHARE    MARKET
              VALUE(RS)   PRICE         CAP(CR)
                           IN NSE(RS)
KINGFISHER    10          13.20         1067.51



JET AIRWAYS   10          350.65        3027.30



SPICE JET     10          34.40         1666.16



CONTAINER     10          1012.55       13161.41
CORP
SWOT ANALYSIS
    STRENGTH:
 Strong brand value


 Support from parent company


 Add 1 million passenger created a year


 Weakness
 Financial issue due to heavy Debt.


   Laying of employees caused a bad image.

 Unable to generate expected returns on investment done.


 Overspending of funds.
SWOT ANALYSIS
  Opportunity:
 The Indian aviation industry is growing at a rate of 24% per year.


 Large number of domestic untapped routes.


 Disposable income especially in middle class has increases.


  Threats
 Rising fuel cost.


 Govt. policies


 Least cost carrier.
CONCLUSION
  Financial crisis of KFA was due to following
  reasons:
 High fuel prices.


 Huge interest outgo due to heavy investment in purchase of aircraft.


 Overspending/Expenses


 Highly competitive industry


 Business model was not effective.


 Deregulation Act.


 Recession-lose passenger(High operation cost due to low demand).
SUGGESTION
 Foreign Investment .


 Fuel efficient planes for shorter distance.


 Improve revenue per passenger.


 Avoid aggressive expansion of fleets.
THANK YOU

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Kingfisher airlines financial crisis

  • 1. PRESENTED BY: MANISH KUMAR SCHOOL OF MANAGEMENT NIT ROURKELA
  • 2. AGENDA  History  Current scenario  Accumulated debt  Consequence of crises  Start of the crisis  Payment problems  Competitor analysis  Swot analysis  Conclusion  Suggestion
  • 3. HISTORY  Kingfisher Airlines Ltd. (KAIR) is a private airline based in Bangalore, India.  Owned by Vijay Mallya of United Beverages Group .  Tag line- “FLY THE GOOD TIME”.  Kingfisher Airlines started its operations on May 9, 2005, with a fleet of 4 brand new Airbus - A320.  It started its international operations on 3 September 2008 by connecting Bangalore with London.
  • 4. Cont..  Kingfisher Airlines is one of the only seven airlines awarded 5-star rating by skytrax.  Kingfisher operates 400 daily flights with regional and long-haul international services.  In May 2009,KFA carried more than 1 million passengers, giving it the highest market share among airlines in India.  Until December 2011,KFA had the second largest share in India’s domestic air travel market.  First Indian Airlines to have in flight entertainment systems on every seat with guest being able to watch TV in flight.
  • 5. CURRENT SCENARIO  The DGCA suspended its flying license on October 20,2012.  KFA has temporarily shut down its operations .  Due to financial problem it has reduced the fleet from 63 to 16.
  • 6. FINANCIAL CRISIS  The Kingfisher Airlines financial crisis refers to a series of events that led to severe disruptions within Kingfisher Airlines.  Ever since the airline commenced operations in 2005, it has been reporting losses.  After acquiring Air Deccan, Kingfisher suffered a loss of over 1,000 crore for three consecutive years.  By early 2012, the airline accumulated losses of over 7,000 crore.
  • 7. CONSEQUENCE OF CRISES  Its half of its fleet grounded.  Salaries delayed.  Several members of its staff going on strike.  Kingfisher's position in top Indian airlines on the basis of market share had slipped to last from 2 because of the crisis.
  • 8. START OF THE CRISIS  The start of the crisis was the freezing of the bank accounts of the airline by the Income Tax Department.  As on 10th Jan 2012, Kingfisher Airlines has service tax arrears of 60 crore.  KFA has not been depositing service tax collected from passenger with the department since November 2011 on regular basis and instead has been diverting it for other purpose on regular basis.
  • 9. ACCUMULATED DEBT  KFA has a debt of Rs 8030 crore.  KFA has been loosing money from day one and has accumulated losses around RS 8000 crore.  Cumulative due exceeds Rs 15000 crore.
  • 10. PAYMENT PROBLEMS  Kingfisher Airline has staff strength of 6,000 and spends 58 crore on salaries a month.  Airlines delayed salaries of its employees in August 2011, and for four months in succession from October 2011 to January 2012.  Kingfisher also defaulted on paying the Tax Deducted at Source from the employee income to the tax department.
  • 11. Conti…  HPCL: In Jul 2011, Hindustan Petroleum Corporation Limited (HPCL) stopped the fuel (ATF) supplies for about two hours to Kingfisher airlines owing to the non-payment of dues.  Bharat Petroleum Corporation in 2009 had filed a case against Kingfisher airlines for non-payment of dues(250 cr).  Since 2008, it has been reported that Kingfisher Airlines has been unable to pay the aircraft lease rentals on time.
  • 12. Cont…  Kingfisher received a notice from the Airports Authority of India on February 2012 regarding accumulated dues of 255.06 crore.  Kingfisher Airlines had not paid some bankers (Lenders) as per the Debt Recast Package (DRP) with lending banks.  By Feb 2012, Kingfisher has been declared NPA (Non-performing asset) by following banks  • SBI  • Bank of Baroda  • PNB  • IDBI  • Central bank  • BOI  • Corporation Bank
  • 13. BALANCE SHEET 10000 8000 7651.81 6314.96 5868.07 5823.91 6000 5289.34 4734.62 4000 5822.37 4747.51 INCOME EXPENDITURE 2000 1569.9 PROFIT 1781.46 0 FY 08 FY 09 FY 10 FT 11 FY 12 -2000 -1027.4 -188.14 -1608.83 -1647.22 -2328.01 -4000 SOURCE: MONEYCONTROL
  • 14. COMPETITOR ANALYSIS ATTRIBUTES KINGFISHER JET AIRWAYS SPICE JET Price 25% higher than Lower than Extremely low jet Kingfisher airlines Airways and Indian Permission to fly NO YES NA to US Permission to fly YES YES NA to UK IPO Floated Floated Floated Targeted Both ends of Both ends of Lower end of Customer customer customer customers Positioning Premium Premium Lowest fares and Domestic Domestic no
  • 15. COMPARISION WITH COMPETITOR INCOME(CR EXPENSES( PROFIT(CR) TOTAL ) CR) ASSET(CR) KINGFISHE 5823.91 7651.81 -2328.01 2947.61 R JET 15477.39 13369.66 -1236.10 12048.61 AIRWAYS SPICE JET 4019.11 4541.62 -605.77 708.20 CONTAINER 4377.49 3037.22 877.88 5606.43 CORP SOURCE:MONEYCONTROL
  • 16. COMPARISION WITH COMPETITOR FACE LAST SHARE MARKET VALUE(RS) PRICE CAP(CR) IN NSE(RS) KINGFISHER 10 13.20 1067.51 JET AIRWAYS 10 350.65 3027.30 SPICE JET 10 34.40 1666.16 CONTAINER 10 1012.55 13161.41 CORP
  • 17. SWOT ANALYSIS STRENGTH:  Strong brand value  Support from parent company  Add 1 million passenger created a year Weakness  Financial issue due to heavy Debt.  Laying of employees caused a bad image.  Unable to generate expected returns on investment done.  Overspending of funds.
  • 18. SWOT ANALYSIS Opportunity:  The Indian aviation industry is growing at a rate of 24% per year.  Large number of domestic untapped routes.  Disposable income especially in middle class has increases. Threats  Rising fuel cost.  Govt. policies  Least cost carrier.
  • 19. CONCLUSION Financial crisis of KFA was due to following reasons:  High fuel prices.  Huge interest outgo due to heavy investment in purchase of aircraft.  Overspending/Expenses  Highly competitive industry  Business model was not effective.  Deregulation Act.  Recession-lose passenger(High operation cost due to low demand).
  • 20. SUGGESTION  Foreign Investment .  Fuel efficient planes for shorter distance.  Improve revenue per passenger.  Avoid aggressive expansion of fleets.