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 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.)


(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 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

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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

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– 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

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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

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