KINGFISHER AIRLINES CRISIS

PRESENTED TO: Mrs. Barkha Pathak

Ms. Ushma Desai

PREPARED BY: Arora Srishti (04)

Shah Bhoomika (11) Mali Divyesh (50) Maskara Nikita (53) Modi Ishita (59)

HISTORY

Industry: Transportation.

Founded: 2003

Operation started: 9 May 2005

Headquarters: The Qube, Mumbai, Maharashtra

Key People: Dr. Vijay Mallya (CMD)

Sanjay Aggarwal (CEO)

Hitesh Patel (EVP)

BRIEF ABOUT KINGFISHER AIRLINES

Kingfisher Airlines established in 2003.

Parent Company: United Breweries Group.

Headquarters: The Qube, Mumbai, Maharashtra

The airline started commercial operations from 9

May 2005.

It started its international operations on 3

September 2008 by starting a flight from

Bengaluru to London.

HOW PROBLEMS STARTED AT KINGFISHER AIRLINES

Ever since the airline commenced operations

in 2005, the company is reporting the losses.

Situation became more horrible after

acquiring the Air Deccan in 2007, the

company suffered a loss of over Rs. 1,000

crore for three executive years.

TACKLING THE CRISIS

DEBT-RESTRUCTURING In November 2010, the company adopted

the way of debt restructuring and under that total 18 leading lenders, those have landed total Rs. 8,000 crores, agreed to cut interest rates and convert part of loans to equity.

Debt-restructuring also couldn’t change the game. By restructuring, company had reduced the interest charges by Rs. 500 crores every year, but due to the high leverage condition and increase in cost, the company started to face the liquidity problem.

CONSEQUENCES

DELAYED SALARY

Kingfisher Airlines delayed salaries of its

employees in August 2011, and for four

months in succession from October 2011

to January 2012.

FUEL DUES

Due non-payment, several Kingfisher's

vendors had filed winding up petition with

the High Court.

CONSEQUENCES CONT…

AIRCRAFT LEASE RENTAL DUES

Due to that, the Kingfisher Airlines has grounded

15 out of 66 aircraft in its fleet as it was unable to

meet the maintenance and overhaul expenses.

AAI REPORTS

Kingfisher received a notice from the Airports

Authority of India on February 2012 regarding

accumulated dues of 255.06 crore.

SERVICE TAX

On 10th Jan 2012, Kingfisher Airlines has service tax

arrears of 70 crore.

BANK ARREARS

Kingfisher Airlines had not paid some bankers

(Lenders) as per the Debt Recast Package(DRP) with

lending banks. Till the end of Dec 2011,the arrears

were estimated to be 260 crore to 280 crore.

THE CRISIS CONT…

During late February, 2012, Kingfisher Airlines

started to sink into a fresh crisis.

Several flights were cancelled and aircraft were

grounded.

The airline shut down most international short-

haul operations and also temporarily closed

bookings.

Out of the 64 aircraft, only 22 were known to be

operational by February 20.

THE CRISIS CONT…

Kingfisher's market share clearly dropped

to 11.3%.

By February 27, Kingfisher operated only

above 150 out of its 400 flights and only

28 aircraft were functional.

OTHER FACTORS

Faulty business modal KFA

Improper handling of Financials by the

company's management

Acquisition of Air Deccan by Kingfisher 

Vijay Mallya's over enthusiasm killed

Kingfisher Airlines

The Employees opposition

The engineers refused to certify aircraft till they were salaries.

The airline failed to pay May salaries till its deadline.

Kingfisher Airlines employees prosecuted promoter Vijay Mallya.

Comparison with other players-Correlating with reasons of failure

High operational cost High fuel prices Many unprofitable routes More turnaround time

MEASURES TAKEN DURING CRISIS

KEY REVENUE INITIATIVES

KEY COST REDUCTION INITIATIVES:

CAPITAL RECAST

SUGGESTIONS TO KFA

Remove the flights from low frequency routes.

Try to bring down the cost-per-flight if an airport services more number of flights.

Improve revenue per passenger. Avoid aggressive expansion of fleets. Avoid full-course meals, give snacks. Try to focus on smaller aircrafts (50-70

seaters) and full efficient planes for short distance.

For a long term strategy, internationally focus should remain one region at time.

SUGGESTIONS TO KFA CONTINUE…

Meet the expectations of customers so that they continues to patronize its products and services and also encourage others to do the same.

Keep it worthwhile for the suppliers of the necessary resources to continue to do business with the organization.

Meet the aspiration of its employees so that they were motivated to contribute to the organization and also help attract and retain the necessary talent for future growth. Comply with expectation of the society/community both in terms of legal compliance as well as a good corporate citizen.

BIBLIOGRAPHY

http://www.flykingfisher.com/media http://timesofindia.indiatimes.com/

india/Kingfisher.../12258986.cms http://

articles.economictimes.indiatimes.com http://www.livemint.com http://www.thehindubusinessline.com