Priyank WALA IDEA..:P

Revival Strategy

Not a lonely case….

• Airline bankruptcies are a common occurrence the world over. The last few weeks have seen hoary Hungarian carrier Malev go under as did Air Finland, Skyway, Cirrus and Danish carrier Climber Sterling.

• Many others, notably United Airlines and America West, have survived after restructuring to fight another decade.

• But this is largely because of Chapter 11 protection that the US banking system allows. When they do revive- it has often meant a complete change in management and operating methods.

Liquidating assets does not help anyone• “Liquidating assets does not help anyone,’’ they say citing the

example of Ispat, Essar Oil and Dabhol Power company. All three eventually began paying back their loans.

• Unlike the steel companies, Kingfisher Airlines has few assets. The aircraft, engines, spares, offices are all leased.

• The slot, brand and people are intangible assets that are difficult to monetize.

• The Kingfisher brand is one of the assets hypothecated for the loans- but bankers are not very sure what they will do with it. Also, it could never get its model right.

In the Beginning…• There was another merger of Kingfisher with Air Deccan, two

humongous loss-makers, during the same time that contributed to further losses.

• The merger of KF and Deccan was hailed as a merger which would make KF Airline the largest player in the domestic aviation market and pave way for Mallya to fly his flights to overseas destinations.

• The airline was called a budget airline and not an LCC. • Fares were above those of LCCs but lower than the economy

class fares of Jet, Sahara, and IA.

No Equity Infusion …REASON..• Our bank accounts are frozen by the tax authorities. • We fully intend to pay our tax dues as much as we

commit to paying your salaries.• The UB Group and its associates acting in concert,

converted its loans for an additional 5 percent equity in Kingfisher Airlines.

• This is the maximum permitted under law in any one financial year but clearly demonstrates the faith that I have in all of you and in our Company.

AIR INDIA & KINGFISHER AIR• Brand new planes combined with massive debt, cancelled

flights, delayed salaries and frustrated lenders. All kinds of cookie-cutter solutions have been tried to revive them.

• The answer, luckily enough for us, also comes from the airline industry. It is consolidation.

• Scale is the solution. • Ex– Air France-KLM, Delta- Northwest and more recently

United and Continental. • You’ve tried everything and it hasn’t worked. Merge Air India

with Kingfisher Airlines.

What synergies does the deal bring?• Well firstly and most importantly- Size. At 190 planes and a route network

that spans the world, this will be the mother of all airline companies in India. Outsizing Jet Airways and Johnny-come-lately IndiGo, not just now but for years to come.

• Imagine the pricing power. Everything from champagne to cucumber sandwiches can be sourced much cheaper.

• With a market of over 40%, this juggernaut will be impossible to ignore. Airfisher will set the rules (and fares) that everyone else will have to follow. Vendors of aircraft, engines, spares and aviation fuel will queue up—and it won’t be for their unpaid bills.

• The new management will be able to squeeze out efficiencies, easily cutting operating costs by at least half. And bringing down CASK (cost per available seat km), as every airline knows, is the key.

Kfa's Promotional Strategy

• As part of its promotional strategy, the marketing team of KFA showcased the airlines as 'the new flying experience'.

• Advertisement hoardings at airports depicted the stylish interiors of the 'Funliners', which conveyed a youthful, fun-filled, and world-class image.

• INOX multiplexes in Mumbai publicized KFA's special offers for a month.

Employee Reward…• Our family will grow with those who have the pride

in their hearts of having stood by our Company through ups and downs, sometimes with great personal sacrifice.

• That is the true test of loyalty dedication and commitment which we are going to reward.

KPMG Advise.• It has to acknowledge the current realities and for that licence you have to

have at least five operational aircrafts.

• We have to first acknowledge that things have gone back and now from here we are going to pull it back.

• The routes have to be chosen very carefully it could just be the trunk routes and then start the business.

• Track it every three months, six months and then gradually ramp it up to 10 aircrafts, 15 aircrafts and so on.

• The plan has to be very simple and credible. Which That anyway is going to through a lot of scrutiny by DGCA.