4. 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)
15 20% 8 9%, 2x
− 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 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)
− 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
4
5. 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
exclusive city pairs; 400+ connections)
l i it i ti )
(contd.)
5
6. 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 operations
y 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
− 25% of Airbus fleet is flexible; can be branded as Kingfisher Class OR Kingfisher Red based on market needs
6
7. 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
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 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
− Additional upside possible through policy initiatives like tax rationalization on fuel
7
8. UB Group – Transparent Holding Structure (as on date)
51.8%
Promoter Group UBHL
Held by Held by Total Group
UBHL Promoters Holding
and Other
Group Cos.
Real Estate (UB City) Investments Pegasus License USL 29.11% 6.65% 35.76%
UBL 12.62% 24.87% 37.49%
KFA 60.58% 5.69% 66.27%
Spirits Beer Aviation Other Inv UB 37.18% 3.56% 40.74%
Engg
gg
35.8% 12.6% 60.6% 10.2% MCF 24.51% 5.94% 30.45%
United Spirits United Kingfisher Aventis
Ltd Breweries Airlines Ltd Pharma Ltd Aventis 10.22% - 10.22%
Ltd
100% 24.5%
50%
Whyte & Mangalore
Mackay Millennium
Chemicals &
Fertilizers Ltd
Alcobev
37.2%
UB Engineering
Ltd
8
9. UB Group’s Entry into Aviation
May-05 Jan-05 31-May-07 • UB Group’s dominance of its core beverage
KFA – first flight KFA buys 26% business,
business gave it unique strengths
Apr-05 stake in Air Deccan – Sharp understanding of the evolving tastes
@ INR150/share and behavior of the Indian consumer
Jul-05
– Ability to create premium products with true
Oct-05
value
– NNuanced understanding of operating i a
d d t di f ti in
Oct-08 21-Jul-08 highly regulated environment
India’s largest Jan-08
Launches plans
carrier with ~ for international
28% market Apr-08 operations and
• Aviation offered extra ordinary growth
share Kingfisher First potential in an emerging economy like India
Jul-08
– UB group launched Kingfisher Airlines to
leverage on its unique strengths
Oct-08
• Aviation business has been built on three
Jan-10 Apr-09 1-Sep-08 core competencies of the group
Kingfisher dominates with Deccan to be renamed as – Ability to deliver a unique experience while
Jul-09
widest network coverage Kingfisher Red remaining competitive
of about 63 cities
operating over 375 flights Oct-09 – Ability to manage scale up
a day within India – Ability to tightly manage costs
Jan-10
9
10. Strong and Highly Experienced Management Team
Chairman &
CEO
Dr. Vijay
Mallya
Operations & In-Flight & Finance Commercial IT
Engineering Services A Raghunathan Manoj Chacko Sourav Sinha
Hitesh Patel Rajesh Verma CFO EVP CIO
EVP EVP
• Currently leading • Rajesh heads Guest • Mr. A Raghunathan is a • Manoj has over 18 years • Sourav currently heads
operations and Services, In Flight qualified Chartered of experience in Indian and Information technology at
engineering at Kingfisher Services, Airports and Accountant with over three international airlines and KFA and has over 17
Airlines, Hitesh has over Security functions at decades of work travel services. He years of work experience
27 years of work Kingfisher Airlines and has experience in finance and currently heads the with airline systems and
experience in the Airline rich experience in the accounts. Before taking Commercial function at technology. Prior to joining
industry. Prior to joining Airline and Hospitality over as the CFO of Kingfisher airlines and is Kingfisher, he spent 10
KFA, Hitesh managed the industries. Prior to KFA, he Kingfisher Airlines, Mr. A responsible for the Sales, years with TCS and was
line and base maintenance worked with Jet Airways Raghunathan worked in Revenue Management, the head of IT department
operations at JetBlue for over 10 years. Rajesh senior finance positions in Network Planning, at Qatar Airways
Airways in United States
y has also worked with the the liquor business of UB
q y y
Alliances and Loyalty
as a Director for over 6 ITC-Welcome Group group for 26 years. He is functions. Prior to joining
years. Hitesh enjoys the responsible for Finance, Kingfisher, he has worked
record of having Accounts, Legal, with American Express
maintained the best fleet Secretarial, Purchase & (Travel services division)
with the highest dispatch Administration and Emirates
reliability of Airbus A320s
world-wide
10
11. Strong and Highly Experienced Management Team (contd.)
Chairman &
CEO
Dr. Vijay
Mallya
Corporate Human Resources Marketing Quality & Guest Security
Development & Rubi Arya Ravikant Sabnavis Commitment Maj. Leslie Missal
Planning VP VP Gaurav Rathore AVP
Amit Agarwal
A it A l AVP
Sr. VP
• Amit has recently joined • Rubi heads the Human • Ravikant currently heads • Gaurav is responsible for • Major Leslie is the head of
Kingfisher as Sr. VP – Resources function at the Marketing function at the Quality, Guest the Security function at
Corporate Development Kingfisher Airlines. She Kingfisher Airlines and Commitment & Call Centre Kingfisher Airlines. Prior to
and Planning. He comes has over 13 years of overall has an experience functions in Kingfisher Kingfisher Airlines, he was
with a strong airline experience spanning of 18 years in Marketing. Airlines. Gaurav has over associated with the UB
background spanning over various industries and He joined the UB group in 15 years experience in the group since 2003, in the
17 years with leading consulting. An MBA in 2007 and was Divisional aviation industry. Prior to role of Security Advisor.
airlines such as American Human Resources from Vice President-Marketing joining Kingfisher, Gaurav Prior to his stint with the
Airlines, Continental India’s premier institute prior to joining Kingfisher worked with Jet Airways UB Group, Major Leslie
Airlines and Delta Airlines. XLRI, she was previously Airlines in September where he was heading the served the Indian Army for
His last role with Delta was associated with the UB 2009. Service Quality Group.
y p 10 years in counter-
y
Managing Director for RM, group. Prior to that, she insurgency areas, and as a
Pricing & the Network worked with Black Cat Commando for 3
Group. PricewaterhouseCoopers years.
in their Human Capital
Solutions group .
11
12. 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
Costs more aligned towards low cost model
C
No Legacy Issues (Unions etc)
Allow high level of operational flexibility
Diversified Network Well spread on business and leisure routes
Monopoly Destinations Highest exclusive stations amongst private carriers
High Service Quality Levels Premium business class product, well trained young staff
Well positioned to capitalize on the demand uptick
Segmented customer base targeted effectively through three sub brands “Kingfisher
Balanced & Flexible Aircraft
First”, “Kingfisher Class” and “Kingfisher Red”
Configuration
Flexibility to deploy same aircrafts across Kingfisher Class and Kingfisher Red based
on need
Outsourced Ground Handling Protection against policy change
More than 1 million members; superior features like faster tier upgrade, non-air reward
Unique Frequent Flyer Program
shop, family club program encouraging customer stickiness
12
13. 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)
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 largest
India s No. India s
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
14. “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
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
Kingfisher 794
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
j y ,
Jet Ai
J t Airways 786
Travels
Spice Jet 773
“The inquisitiveness about Mallya and his lifestyle draws a
sizeable number of flyers to Kingfisher. Given an option, I prefer
Indigo 761 Kingfisher. It is much better value for money”
Ankur Bhatia, MD, Amadeus India, the country’s largest online
reservation system
Go Air 752
Jet Lite 745 “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.”
Air India 736 Rajesh Verma, Mumbai-based exporter
700 720 740 760 780 800
Notes
(1) Higher scores indicate greater satisfaction levels
14
15. Differentiated Strategy Offers Best-in-Class Value
• Only low cost airline to provide
• Only domestic airline to provide Complimentary
complimentary meals including
Gourmet Cuisine Gourmet menus created by a team of Hot & Filling On-
breakfast, lunch, snacks and dinner
renowned Chefs Flight Meals
depending on flight timings
• Our on-board reading material is a
mix of International and Domestic,
• Selection of Indian publications such
Business, Fashion and Leisure
as Cine Blitz, Times of India,
In-Flight Magazines In-Flight Reading
Economic Times and local
Reading Material • The newspaper selection ranges from Material
newspapers as on board reading
The International Herald Tribune and
material
The UK Times to ethnic language
publications
• Kingfisher First lounge on board is
Kingfisher • Only low cost airline in India to offer
staffed by professionally trained Frequent Flier
Lounge in the
g Frequent Flier Privileges
Bartenders offering Signature Privileges
Air • Reward system linked to King Club
Cocktails in a luxurious setting
• Kingfisher First Amenities (Perfumes, • A judicious mix of customer service
Eau de Toilettes, Moisturisers, Lip and basic comforts provided at low
In Flight
In-Flight Guest Efficient Service
Balms and t il d Sl
B l d tailored Sleeper S it )
Suits) costt
Amenities at Low Cost
exclusively designed by Salvatore • Delivers a delightful experience to the
Ferragamo cost conscious yet discerning traveler
15
16. Partnerships & Frequent Flyer Program
• More than 88 bilateral and unilateral interline partners across the world
• Focused on attaining code shares
Partnerships
• Only Indian private carrier slated to join a global Alliance- One World, which is expected to further enhance
revenue and streamline costs
• 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)
Frequent Flyer Program • 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%)
68%)
• Significant ancillary revenue generation through 57 partners across 10 verticals ( Banking, Hotel, Retail)
• Launch of an auto-sweep co brand credit card (current and new partner) expected by Q2 FY11
New Developments and • Launch of debit co-brand card expected by Q4FY11
way forward • Extension of King Miles as a preferred loyalty currency by increasing width of partners
• Increased CRM based analytics and campaigns
16
17. One World Alliance
About One World
One World serves 800 airports in 150 countries. It
World’s most profitable global alliance, bringing
operates 9,000 daily flights, carrying 340 mn
together the leading airline carriers American Airlines
carriers- Airlines,
passengers annually, on a combined fleet of 2,500
British Airways, Cathay Pacific, Qantas, Finnair
aircraft
Only alliance with member airlines based in every
Voted the World’s Leading Airline Alliance for the
continent and with members based in South America,
seventh year running in the 2009 World Travel Awards
Australia and Asia’s Middle East
Key Benefits for Kingfisher
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
Significantly enhance customer proposition
– Top-tier qualifying miles
– Top-tier recognition
– Global lounge access
Provide further opportunities for cost savings and access to management best practices
17
18. Powerful Marketing Efforts Drive the Kingfisher Brand
Strength
Movie Associations
and in - Film
Branding
Events
Cabin Crew with Delhi CM Events: Women’s Conference Kingfisher Cabin Crew
at Delhi Marathon with Cherie Blair at the TiE Summit
Outdoor Branding
18
19. Significant Marketing Synergies from Parent Group
Branding
Leveraging Group Marketing Assets
Formula 1 Car Racing Team Kingfisher East Bengal Football Club
Royal Challengers IPL Cricket Team
Kingfisher Frequent Flyer Program
19
20. Extensive Network Providing the Widest Domestic Reach
66 aircraft
Market Share Evolution
70 destinations %
394 flights a day 100
4 2
4 1
15
75 27 12
5
11 AI
18
50
7
36
18 JA
25
12 22 KFA
5
0
FY 2005-06 January 2010
KFA Air Deccan Jet Airways
Jet Lite Air India Alliance Air
Go Air Spice Jet Indigo
Paramount
Source: DGCA 20
21. Performing well on operating parameters
Key Operational Analysis KFA
Current Fleet (Dec’09) 61
Average 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) 3.58
CASK (Apr-Dec’09) 3.88
Unionized No
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
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
21
22. Uniquely Flexible Fleet to Aid Market Based Deployment
Current Fleet Description Projected Delivery Schedule
Fleet Type # Aircraft Fleet Type # A320 # A330 # A350/380 Total
Airbus 319 3 2011 - - - 0
Airbus 320 23 2012 6 4 - 10
Airbus 321 8 2013 9 3 - 12
Airbus 330 5 2014 7 4 2 13
ATR 72 25 2015 8 4 6 18
ATR 42 2 2016 12 0 2 14
Total 66 Total 42 15 10 67
• Fleet Strategy
– 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
best sky
medium & long haul operations
22
23. Leverage Strengths in Engineering & Maintenance
• ISO certification- twice a year audit done by BSI Management system, India, a subsidiary
Key Industry Standard
of British Standards Institute
Certifications
• IOSA certification- 3 Audits (KF standalone, DN standalone, KF & DN combined)
Fleet Management
• Self management of entire NSOP fleet – B727 / HS125 / Helicopter EC 155
Capabilities for
• Total care support to Reliance ACJ (VVIP Aircraft)
Specialized Purposes
• First organization to receive approval under CAR 145
High Operational
• Highest operational reliability of A321 fleet in world fleet & one of the best technical
g p y
Reliability and Safety
dispatch reliability in A320 family fleet
Management
• Safety management system is built into E & M policies through MOE & QMS
• Approvals obtained from Civil Aviation Authority of Singapore (CAAS), Qatar Civil Aviation
Foreign Regulatory
g g y
Authority (QCAA) Civil Aviation Authority of Srilanka (CAASL)
(QCAA),
Approvals
• Approvals in process: General Civil Aviation Authority (GCAA-UAE), EASA
Third Party Handling
Support at Indian
Airports
23
25. Most Attractive Aviation Market in the World
…Aviation traffic in India
Historical domestic passenger …Enabling conditions would
amongst lowest in
CAGR of 20%... ensure continued growth
BRIC countries…
Growth of Indian Aviation Industry Aviation Traffic Penetration in BRIC • Economy expected to
Countries
continue to grow at 7% – 9%
50 0
50.0 CAGR of 20% since FY 2004 25
44.4 45.1 23 • Ministry of Civil Aviation
envisages creating
39.4
40.0
35.8
20 infrastructure to handle 280
MM passengers by 2020
30.0 15
25.2 13
• Indian Middle Class to reach
20.0
19.4 50% of India’s population at
15.7 10
600 MM by 2025
10.0
5 4
0.0
0
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10E
Brazil China India
Annual domestic pax traffic (Mn)
No. of domestic passengers per 100 people
KPMG expects India’s air traffic to grow 2 – 3 times by 2012
Source: KPMG, MOCA, CAPA, McKinsey Global Institute 25
26. Highest Growth Aviation Market in the World
CIS
Europe 8.7%
7.9%
7 9%
North America
10.5%
Middle East
11.5%
11 5%
7.2%
Africa Asia-Pacific
8.3% 7.4%
India World
20-year 20-year
2007 2016 2017 2026
2007-2016 2017-2026 2007 2016 2017 2026
2007-2016 2017-2026
growth growth
9.7% 6.4% 8.0% 5.4% 4.4% 4.9%
Source : Airbus Estimates
26
27. Massive Infrastructure Investments Supports Growth
Massive Airport Investments Non-Metro Airports Identified for Upgrade and
• Over next 5 years, Airports Authority of India Modernisation
has planned an investment of US$3.1 Bn
Government policy support for Infrastructure
Jammu
• 100% FDI under automatic route is permissible Amritsar
Chandigarh
for green field airports Dehradun
• Private developers allowed setting up of Jaipur Agra Lucknow
Guwahati
Dimapur
captive airstrips and general airports 150 km. Udaipur
Varanasi Patna
Bhopal Agartala Imphal
away from an existing airport Ahmadabad
Indore
Khajuraho
Rajkot Ranchi
Vadodara
• 100% tax exemption for airport projects for a Nagpur Raipur
period of 10 years Aurangabad Bhubaneswar
Pune Vizag
• The Government is also planning to develop
around 300 unused airstrips Goa
Mangalore
Port Blair
Coimbatore
Agatti Trichy
Madurai
Trivandrum
Land Constrained Airports Unconstrained Airports
Source : CAPA
27
28. Move Towards a Rational Supply Environment
Avg. Monthly Seats Offered
Seats Offered
Industry (MM) Industry (MM) H-o-H
HoH∆
6.5 2H 2008 4%
1H 2009 (16%)
6.1
6.0 2H 2009 3%
6.0
60 5.9
5.8
5.6
5.5 5.5
5.5 5.4
5.3
5.2 5.2
5.4
54
3
5.3 5.3 5.3
5.2 5.1 4.9 4.9
5.0 5.1
5.0 5.0
4.8
4.5
45 4.6
4.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CY08 CY09
Source : MOCA Website, PIB press releases
28
29. Government Policies Present Upside…
• Expected change in Government policies & in macro-economic environment would result in
lower 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 p
p private airports expected to be charged as UDF from consumers. No
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
30. …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)
1-1.5
• 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)
Notes
1) Naresh Chandra Committee Report
2) Port Authority report on New York aviation market
3) IATA report
4) YTD FY10 market share
30
31. Indian Aviation – The Way Forward
• The economy continues to show signs of recovery with GDP g
y g y growth estimates climbing back
g
over 7%
Favourable
• Passenger traffic has firmed up in Q4 and is expected to grow by > 15% in the coming year
Economic Outlook
as per CAPA estimates
• Premium traffic has also seen a comeback and growth is expected to continue
• Industry capacity is more aligned to demand after a series of sharp cuts in the early 2009,
Better Demand-
and capacity induction in the current year is expected to be <10 % as per CAPA estimates
Supply Match
pp y
• Yi ld i
Yield improvements witnessed i Q3 are expected to continue given the narrowing of the
i d in d i i h i f h
Should Improve
demand supply gap. CAPA expects domestic yields to improve by 5-7% in 2010-11 and as
Yields
high as 10% in Q3 of next year
• Rational pricing is expected from industry, going forward
Pricing and Policy
• Government is re-evaluating policies which might benefit industry – ATF taxation, FDI
Matters
norms, RDB guidelines
, g
31
33. Kingfisher Has Actively Rationalized and Restructured
Capacity…
KFA Capacity Trend
Second round of capacity
rationalization to balance
demand supply
First mover to rationalize
industry capacity
Shift of capacity towards KFR to
address the tough market requirements
• 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
33
34. …And Has a Well Calibrated Plan for its International
Operations…
KFA adopted a cautious approach to international operations due to the prevailing economic
conditions:
– Did not initiate Ultra-long haul A340 operations - sold out the Aircrafts
– C ti
Cautiously d l
l deployed th A330 t LHR SIN and HKG markets to build operations i t k
d the A330s to LHR, d k t t b ild ti 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
short haul BKK, DXB CMB
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 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
35. …Which is Improving Operating Performance
Improvement in Overall Seat Uptick in KFA’s Domestic Rising Yields as Seen in
Factors of KFA Revenue (RASK-Fuel CASK)
( ) KFA’s Domestic ATV
% RASK (in Rs.) KFA ATV Trend – ATV (INR)
85 3.5
7,000
3.0
80
6,000
2.5
75
2.0
70 5,000
5 000
1.5
65
1.0
4,000
60 0.5
55 0.0 3,000
c- 9
Fe -0 9
Ju -0 9
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Apr- 09
Au l-09
Se - 09
O - 09
09
ay 9
Ju -09
No - 09
v
n
n
Au l
c
g
p
M r
ar
b
ct
ay
Ju
De v-0
c- 9
M r- 0
Fe -0 9
Ju 0 9
M - 09
Ap - 09
Ap
Au l-09
Se - 09
O - 09
09
ay 9
Ju -09
No
No - 09
Ju
Ja
Se
De
Fe
b-
De v-0
M r- 0
O
M
n
n
g
p
ct
n-
a
Ja
n
ar
b
g
p
ct
Ja
2008–09 2009–10
SF KFC KFR Total
35
36. Improvement Reflected in Y-o-Y Results…
Apr 09 - Dec 09 Apr 08 - Dec 08
(Rs. Cr) (Rs. Cr) Variance %
INCOME
Operating Revenue 3,776 4,168 -9%
Non Operating Revenues 43 16 +169%
Total Revenues 3,819 4,184 -9%
EXPENDITURE
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)
PROFIT / (LOSS) AFTER TAXATION (1,075) (1,055) +2%
36
37. With This Stringent Cost Focus, Kingfisher Has Emerged as
the Lowest Cost FSC in the Current Year
Cost Comparison (Apr-Dec FY10)
KF
Cost Details
Rs. Cr Adjusted CASK (1)
Fuel Cost 1,102 1.24
Non-Fuel Cost 1,920 2.08
Employee
Emplo ee 472 0 48 (1)
0.48
S&D 408 0.46
Other 1,041 1.14 (1)
EBITDAR Cost 3,021 3.32
Lease Cost 665 0.68
0 68 (1)
EBITDA Costs 3,441 3.72
Depreciation/Amortization 156
EBIT Costs 3,598 3.88
ASKM (Mn) 8,860
8 860 9,760
9 760 (1)
ASL 803
Seats/Flight 110
Notes
Costs 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)
37
38. 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
Rationalizing
Distribution – New IBE geared towards increasing website sales
Channels
• Overall S&D cost and achieving a cost of < $4 per RPB, by restructuring CRS/GDS contracts and increasing direct web
share
Renegotiating • Additional fuel discounts
Vendor Agreements • 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
• Reduce Rentals, costs of Transportation and local Conveyance, Communication
Control
Discretionary − Consolidate and optimize space (warehouses, offices, call centers)
Spend − Increase effectiveness of spends and increase barters to reduce Marketing costs
• Reductions in employee cost through sizing manpower with capacity
Head Count • Replacement of high cost expat pilots in narrow body fleet
Rationalization
• Reduction in excess AMEs/ ATR expat
• Reduce fuel consumption to less than 3,000 Ltr/BH for A320 and 750 Ltr/BH for ATR operations through targeted reviews
p , p g g
Operational • Target E&M spend reduction (in-house C-checks, controlled redelivery)
Efficiency
38
39. 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
• Review and help restructure Sabre contracts
• Review network strategy with focus on profitability
• Benchmark aircraft lease rentals and maintenance reserves to the best
• Evaluate profitability of ATR fleet
39
40. 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
through expansion inter-line evaluation
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
