kingfisher airdeccan merger
DESCRIPTION
Kingfisher airdeccan merger before and after,the synergiesTRANSCRIPT
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Mergers & Acquisitions
Marriage of
Presented by,
Rohit Mundhara P-21
Mayuresh Bhagwate C-05
Bijal Shah C-32
Aditi Sabaria C-31
Supriya Joshi P-13
Paritosh Gupte P-10
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Monopoly of PSU’s
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• New Industrial Policy 1991
• Air Corporation Act 1994
• Post liberalization period
Scenario after 1990’s
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Entry Of
Private Players
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Low Cost carriers
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Consolidation
The Need Of The Hour
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• Origin- Deccan Aviation Ltd.
• Growing demand of Air
connectivity
• Identifying potential Consumer
base
• The biggest challenge
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Towards making Air travel more Comfortable
• E-ticketing• Cut on the Complementary service - food to passengers - no meals or company vehicles - no separate staff - route planning - outsourcing of ground operations - saving operating cost, landing cost &
sales tax
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Generation of Additional Revenue
• Sale of food inside the aircraft
• Selling Advertisement• Differential ticket pricing• Non refundable tickets• No bulk discounts• Paid initial training to staff
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• Dr Vijay Mallya identified the gap• Launched in 2005 by United
Breweries Group• Ready for take off with 4 flights a
day and a fleet of one Airbus320• Ushered a new era of luxury• Many international and national
awards
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• Carved a niche for itself in a short span of time
• Only airline offering premium 1rst class service on domestic routes
• Modelled on the lines of US carrier Jet Blue
• Targets Sec A and socio-economic classes
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• Great in-flight experience - Personal valet assistance in
luggage handling at airport - Personalised in-flight
entertainment system - Fashion models as flight
attendants - Designer flight interiors -Extendable footrests -3course gourmet cuisine
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Clash of The Titans
MARS v/s
VENUS
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Motivation for
Merger• Ever Increasing
Cost• Compromise on
quality hits the brand
• Unviable pricing• Competition
• Increasing costs• Difficulty in
maintaining brand image
• Competition from low-cost airlines
• Competition from International Airlines
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Possible gains
• Routes network
• License to fly internationally
• Cash crunch• Leveraging
management and HR
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Possible gains
• Economies of size• Rationalization of Personnel• Increase in Customer base
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Possible losses
• Fundamentally opposite models• Impact on masses - -Fear of rise in fare prices -Ignorance of target audience• Loss of individuality
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Final Merger Deal
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LOSSES YEAR ENDED
Kingfisher Airlines
Rs.577crs 31st March,2007
Deccan Aviation
Rs.418crs 30th June,2007
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DEAL STRUCTURE
• 1st Phase:- UB bought 26% stake at Rs.155
p.s. on 9th July,2007- Paid Rs.550crores
• 2nd Phase:- Open offer for additional 20% stake- Additional Rs.418crores
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Changes in Stock Prices
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Stock Prices of Deccan Aviation
Price
s
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COST BENEFIT ANALYSIS
• Cash Paid = Rs.550Crs + 418Crs = Rs.968Crs
• Present Value of 46%stake = 62316254.28*137.5 = 856.85Crs
• Cost for kingfisher = Cash Paid-Present Value
= 968-856.85
=Rs.111.15Crs.
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SYNERGIES
• Operational Synergy in the form of cost cutting(upto Rs.300crs.)
• Increasing market share(32-34%)• Have both direct and indirect
connectivity to the US, Europe and different Asian regions
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SYNERGIES
• Received in writing slots to operate flights in San Francisco, JFK (New York) and Heathrow (London)
• These destinations will be connected non-stop from Bangalore, unique routes from India
• Also applied for Mumbai-Hong Kong, Mumbai-London and Delhi-Kathmandu routes.
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The Aftermath – Post Merger Issues
• Different Cultures
• Expected Job Cuts
• Different Leadership Styles
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contd...• Expected Industry impact
Further consolidation
Rise in fares
Greater shareholder value
Higher attrition rates in employees
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Current Scenario
•Market Share
•Kingfisher airlines – Jet airways :- Strategic Alliance
•UB group ready to Divest
•SIPO’s & Rights Issue
•Financial Report
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Current Scenario
•Delays in AirCrafts deliveries &Cancellation of Orders
•Industry Making Losses-Oil Concerns
• Infrastructure
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Conclusion
The Industry has Witnessed tremendous
growth in the Past Decader Leading to
intense Competition in the Industry &
Setting the Stage for Consolidation
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• Webliography – www.flykingfisher.com www.yahoofinance.com www.google.com www.bseindia.com www.businessworld.in