kingfisher financial turmoil

7/29/2019 Kingfisher Financial Turmoil

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Companys ProfileKingfisher Airlines

IATA

IT

ICAO

KFR

Callsign

KINGFISHERFounded 2004

Hubs

Bangalore International

Airport,

Chhatrapati Shivaji

International Airport,

Indira Gandhi

International Airport,

Sardar Vallabhbhai Patel

International Airport

Frequent flyer program King Club

Fleet size 158 (incl. 126 in order)

Destinations 29

Parent company UB Group

Company slogan Fly The Good Times

Headquarters Bangalore, India

Key people

Dr. Vijay Mallya, CMD

Mr. Hitesh Patel, EVP

Mr. Rajesh Verma, EVP

Mr.A. Raghunathan, CFO

Website: http://www.flykingfisher.com/
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Introduction

Kingfisher Airline is a private airline based in Bangalore, India. The airline is

owned by Vijay Mallya of United Beverages Group. Kingfisher Airlines started its

operations on May 9, 2005 with a fleet of 4 Airbus A320 aircrafts. The airline

currently operates on domestic routes. The destinations covered by Kingfisher

Airlines are Bangalore, Mumbai, Delhi, Goa, Chennai, Hyderabad, Ahmedabad,

Cochin, Guwahati, Kolkata, Pune, Agartala, Dibrugarh, Mangalore and Jaipur.

In a short span of time Kingfisher Airline has carved a niche for itself. The airline

offers several unique services to its customers. These include: personal valet at

the airport to assist in baggage handling and boarding, accompanied with

refreshments and music at the airport, audio and video on-demand, with extra-

wide personalized screens in the aircraft and three-course gourmet cuisine.

Kingfisher Airlines currently operates with a brand new fleet of 8 Airbus A320

aircraft, 3 Airbus A319-100 aircraft and 4 ATR-72 aircraft. It was the first airline in

India to operate with all new aircrafts. Kingfisher Airlines is also the first Indian

airline to order the Airbus A380. UB holdings Ltd, has acquired 26% stake in the

budget airline Air Deccan and has option to buy further of 20% stake from the

secondary market.
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History

Kingfisher Airlines is a subsidiary of the UB Group, one of the largest beverage

companies in the world. The branding of the airline is linked to that of KingfisherBeer, Indias largest brewery.

The airline, which is headed by the charismatic Dr Vijay Mallya, took to the skies

in May 2005, and attracted attention for its high quality product with personal

inflight entertainment in every seat; custom interior designs for each aircraft; valet

assistance at airports and complimentary hot food and beverages. The airline

initially operated a single class service but subsequently introduced a highly

acclaimed First Class, allowing it to compete with Jet Airways for the high yield

corporate market. In addition to its A320 family aircraft used on domestic routes,

Kingfisher Airlines also operates ATR-72 turboprops on regional sectors.

Under current Indian regulations, which require airlines to operate 5 years

domestic service before being granted international rights, Kingfisher will not be

permitted to operate overseas until 2010. However, the airline has very clear

international ambitions, with an order book for 45 wide body aircraft, including

A330s, A340s, A350s and A380s.


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In just over two years, Kingfisher Airlines has achieved a market share of 10% and

has one of the most aggressive expansion plans of all Indian carriers during 2007.

In Jun-07, it dramatically increased its influence in the market with the acquisition

of a 26% shareholding in Indias largest LCC, Air Deccan, for approximately

USD130 million, and an open offer for a further 20%. Through schedule

coordination and joint operations in ground handling, training, and maintenance,

the carriers are projecting annual cost savings of over USD70 million.

There will also be greater coordination between the two brands, with Air Deccan to

adopt the Kingfisher image in its logo and to switch to a red, rather than a blue

colour scheme. The combined Kingfisher/Deccan group has a market share of just

over 30% and a product range spanning from the price-sensitive, first-time flyer, to

the high yield business traveler, making it one of the key pillars of the airline

industry.

The airline which started its operation on 9th May2005, following the lease of 4

Airbus A320 aircraft. As of July 2007, Kingfisher operates only on domestic

routes, however it has announced plans to start flights to the USA with Airbus

A380 aircraft. The airline is owned by the United Beverages Group under the

leadership ofVijay Mallya(which also owns the popular Indian beerof the same

name). The airline promises to suit the needs of air travellers and to provide

reasonable air fares. Kingfisher Airlines' main "luxury" component is its In-Flight

Entertainment System, a first among Indian airlines . The airliners in-flight Mobile

Phone and Internet Services will be provided by OnAirstarting 2008 for longhaul

flights.
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Welcome Kingfisher Airlines!

Kingfisher Airlines commenced commercial operations on 9 May, with its maiden

service from Bangalore to Mumbai with 174-seat A320 aircraft.

Other details include:

Fleet: To operate a minimum of 33 aircraft within the next two years and 55 by

2010;

Fares: Bangalore-Mumbai fares are at least 35% lower than Indian Airlines andJet Airways;

Network:Bangalore-Mumbai frequency increased from two to three times daily

on 20 May. Bangalore-Delhi service commences on 6 June.


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According to UB Group Chairman, Vijay Mallya, the airline plans to acquire 11

aircraft by December this year and buy one aircraft every month from January

2006. Dr. Mallya is optimistic about the prospects for the airline, which is targeting

Indias increasingly affluent middle large.

If you look at the emerging India, by 2010 there will be a new generation of

consumers of about 150 million. Who are these people? These are youngsters who

are earning money out of information technology, biotechnology,

entrepreneurs?people who have a much greater propensity to spend than when I

was young, said Dr Mallya.

Air Deccan Managing Director GR Gopinath welcomed Kingfisher, stating the

move would energise the market. According to Capt Gopinath, there is a

tremendous need for airline capacity as the requirement is huge.

Kingfisher Airlines has contracted Indian Airlines to operate government mandated

socio-economic routes on its behalf. Airlines operating on trunk routes in India are

obligated to operate a certain proportion of capacity to remote regions. This forms

part of a INR1.2 billion agreement with Indian Airlines for outsourcing of ground

handling and maintenance services for a minimum of two years.

Meanwhile, Kingfisher Airlines is offering 1,000 one-way tickets each day priced

at INR2,999 (USD69.20) on Mumbai-Bangalore service in May (travel dates not

disclosed), and 1,000 one-way tickets each day priced at INR4,999 on Bangalore-

Delhi service in June. The airline is seeking to launch Delhi-Mumbai service in

August 2005.


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Archieves

The King Of Good Times has done it again: Is the World Ready? Kingfisher Airlines, American Express to lunch co branded card Kingfisher Airlines Open 2007 to feature Global Tennis Legends Kingfisher F1: Marketing, The Vijay Mallya way ICICI Bank and Kingfisher Airlines Launch Co-branded Credit Card Kingfisher Airlines and dishtv Form an Unprecedented Alliance in the

Indian Skies

Kingfisher Airlines to buy 26 percent in Air Deccan for US$135million

Kingfisher becomes first Indian customer for A380, A350, & A330 Mallya's Kingfisher Airlines Plans IPO In 2006 Kingfisher ties up with perfume brands in promotional offer


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Kingfisher Airlines to buy 26 percent in Air Deccan

for US$135 million

United Breweries (Holdings) Ltd., which runs Kingfisher Airlines, is to buy 26

percent of Deccan Aviation Ltd, which operates the low-cost carrier Air Deccan,

for US$135 million.

Deccan will issue about 35 million shares at US$3.8 each to United Breweries

(Holdings), an 18 percent premium to Deccans closing price on Wednesday. UB

Group has paid an advance of US$36.82 million and the balance will be paid in

next four months.

UB Holdings, with its Kingfisher Airline, had been the natural ally for Air Deccan,

Capt. GR Gopinath, MD, Deccan Aviation said, adding that both airlines would

complement each other. He said, Keeping in mind various options we had, we felt

that in the long term vision of our company, the association with UB Holdings will

make enormous financial and operational sense where each others best practices

could be shared.

Air Deccan would continue to remain as an independent entity and pursue the low-

cost model. While Capt. Gopinath would be the Executive Chairman of Deccan

Aviation, Mr Mallya would be the Vice Chairman. Both would appoint six

directors each besides having six independent directors on the board, while the

board would appoint the Chief Executive Officer.

Air Deccans Chief Financial Officer Ramki Sundaram would be the acting CEO,

Capt. Gopinath reportedly said.


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Some Strategies Adopted by Kingfisher Airlines

Kingfisher Airlines will not be a run-of-the mill Indian budget airline.

Kingfisher Airlines will be emphasizing on spunky, well-done interiors andtrained airhostesses.

Borrowing from the Kingfisher beer tagline of "The King of Good Times"the theme of "Fly the Good Times" is given to KFA.

Kingfisher is planning to capture the Indian budget airline market with thetwin engines of 'special flying experience' and 'value for money'. (Contests

like `Kingfisher flying face of the month' are on cards).

The Kingfisher airhostesses will be selected through a nationwide contest. The Kingfisher "Funliners" will have in-flight silent auctions for lifestyle

products and sales of packaged food and beverages.

The Kingfisher brand of exuberant, youthful and fast-paced image isleveraged(the brand recall).

Brand endorsement. Kingfisher Airline has roped in model Katrina Kaif toendorse the airline.

AIR Deccan has signed a non-poaching agreement with Kingfisher Airlinesto ensure that the two airlines do not poach each other's pilots.


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The Challenges Ahead

Experts say that airlines compete primarily on three fortes - low fares,customer service and value-added services. While no-frillers fight the price

war, service is the main thing provided by their larger peers.

The critical factor will be (depending upon the model followed) the ability tokeep costs low & the offer of an on time service at an affordable price,

despite the infrastructure constraints, for survival.

The next issue to tackle is to properly position itself in the aviation market. The Indian customers are not that much mature as compared to their

American contemporaries. They will not pay more for just mere

entertainment or watching TV in a flight of one / one & half hour journey.

A certain amount of churn & turmoil for players who don't have the deeppockets (as happened in USA many smaller airlines with out deep pocketsfell by the wayside unable to sustain the predatory pricing techniques

adopted by their strong opponents).

The outdated Aviation rules in India which compels the low cost carriers toadd more to their operating cost, which could have been easily do away

with.

Taxes like passenger service fee (PSF = Rs. 221 on one seat) looksridiculous for a ticket worth Rs. 99.


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SOME FUTURE STRATEGIES FOR KINGFISHER AIRLINES

Market Penetration Strategy Product Development

Market Development Strategy Diversification

Market Penetration Strategy (1st Quarter) Encouraging existing Customer to buy more Showing benefits for using

more (associating freebies/extra service/membership with primary offering). Try to look for foreign entrant's weakness (Virgin Atlantic is lacking in

Indian values & tastes).

Product Development (2nd Quarter) Seek additional distribution channels (More tie ups & collaboration: Try

seeking collaboration with international carriers, Bilateral discussions overseats and code-sharing between the carriers).

New product development. Market Development Strategy (3rd Quarter) Try to find out new customer group (Old-retired persons). Special offering for first time fliers. Diversification (4th Quarter) May go for other services like international flights etc. (concentric

diversification). May go for arrangement fashion shows (horizontal diversification). May go for other things, which can lure the youth.


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FINANCIAL TURMOIL

Mounting Losses

Since inception, Kingfisher Airlines is yet to post profit on annual & total cost

basis. Following are YoY financial results of Kingfisher Airlines, all numbers are

in Indian rupee (INR) crore except EPS, which is in INR.

# From To Months Total Income Cost Net Profit EPS

01 Apr-05 Jun-06 15 1,352 1,689 -337 -68

02 Jul-06 Jun-07 12 2,142 2,562 -420 -42

03 Jul-07 Mar-08 09 1,546 1,734 -188 -11

04 Apr-08 Mar-09 12 5,577 7,186 -1,609 -55

05 Apr-09 Mar-10 12 5,271 6,918 -1,647 -54

06 Apr-10 Mar-11 12 6,496 7,523 -1,027 -16

07 Apr-11 Sep-11 06 3,410 4,142 -732 n/a

Total 78 25,793 31,754 -5,960

Debt Recast

In Nov 2010, Kingfisher Airlines has completed restructuring 8,000 crore

(US$1.52 billion) debt, with all 18 lenders agreeing to cut interest rates and convert

part of loans to equity.

Lenders have converted 650 crore (US$123.5 million) debt into preference shares

which will be converted into equity when the airline lists on the Luxembourg Stock

Exchange by selling global depositary receipts (GDR). Shares will be converted

into ordinary equity at the price at which the GDRs are sold to investors. Besides
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the 1,400 crore (US$266 million) debt which will be converted into preference

shares, another 800 crore (US$152 million) debt has been converted into

redeemable shares for 12 years.

Airline's average interest rate is now down to 11%, helping the airline save 500

crore (US$95 million) crore every year on interest cost. Consortium of banks was

represented by SBI Capital Markets.

Kingfisher Airlines Ltd has informed BSE that the Board of Directors of the

Company at its meeting held on November 25, 2010, has approved a Debt Recast

Package (DRP) with lending banks, following a one-time relaxation inrestructuring guidelines sanctioned by the Reserve Bank of India. The salient

features of the DRP include:

1. Conversion of debt of up to 1,355 crore (US$257.45 million) from lendersinto share capital.[33]

2. Conversion of debt of up to 648 crore (US$123.12 million) from promotersinto share capital.

3. Reschedulement of repayment of the balance debt to lenders over 9 yearswith a moratorium of 2 years.

4. Reduction in interest rates.5. Sanction of additional fund and non-fund based facilities by the lenders.

While Board sanction has been received from several lenders, the same is shortly

expected from the others. The DRP is subject to execution of necessary

documentation.

In order to give effect to the DRP mentioned above, the Board of Directors at its

Meeting held on November 25, 2010, has resolved as follows, subject to the above
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approvals and subject to the approval of the shareholders and such other regulatory

and other approvals as may be required:

1. To issue and allot up to 57,50,00,000 (Fifty Seven Crores Fifty Lakhs only)8% Redeemable Cumulative Preference Shares of 10 (US$0.19) each

redeemable at par at the end of 12 years, to the members of the consortium

of lenders in consideration of the extinguishment of the amount due to the

members of the consortium of lenders under various loan facilities availed

by the Company.

2. To issue and allot up to 78,00,00,000/- (Seventy Eight Crores only) 7.5%Compulsorily Convertible Preference Shares of 10 (US$0.19) each to the

members of the consortium of lenders in consideration of the extinguishment

of the amount due to the members of the consortium of lenders under

various loan facilities availed by the Company.

3. To amend the terms and conditions of 97,00,000 (Ninety Seven Lakhs only)6% Redeemable Preference Shares of 100 (US$1.9) each issued to United

Breweries (Holdings) Ltd. (Promoter Company), inter alia, to convert these

shares to 9,70,00,000 (Nine Crores Seventy Lakhs only) 6% Compulsorily

Convertible Preference Shares of 10 (US$0.19) each.

4. To issue and allot up to an aggregate of 64,80,00,000/- (Sixty Four CroresEighty Lakhs only) 7.5% Compulsorily Convertible Preference Shares of

10 (US$0.19) each to United Breweries (Holdings) Ltd. and to Kingfisher

Finvest India Ltd. (Promoter Companies) in consideration of the

extinguishment of the amount due to United Breweries (Holdings) Ltd. and

Kingfisher Finvest India Ltd., from the Company.

5. To issue and allot up to 2,00,00,000/- (Two Crores only) 8% OptionallyConvertible Debentures of 100 (US$1.9) each to Star Investments Ltd. in
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consideration of the extinguishment of the amount due to Star Investments

Ltd. from the Company.

6. To issue and allot up to 3,00,00,000/- (Three crores only) 8% OptionallyConvertible Debentures of 100 (US$1.9) each to Margosa Consultancy Pvt.

Ltd. in consideration of the extinguishment of the amount due to Margosa

Consultancy Pvt. Ltd. from the Company.

7. To issue and allot up to 3,00,00,000/- (Three Crores only) 8% OptionallyConvertible Debentures of 100 (US$1.9) each to Redect Consultancy Pvt.

Ltd. in consideration of the extinguishment of the amount due to Redect

Consultancy Pvt. Ltd. from the Company.

Second Debt Recast

Kingfisher Airlines, in Nov 2011 was attempting for a second debt recast.

However second debt recast has been ruled out by Government of India. Minister

of state for Finance made a statement on 09th Dec 2011.

Brand Pledged

Kingfisher Airlines has pledged its brand as collateral with its lender consortium

for 4,100 crore (US$779 million). The brand valuation was done by Grant

Thorton in 2010[34]. Reportedly the Brand has been valued and loan raised worth

triple carriers market value.

Founders pledge entire stake

On July 6, 2011, pursuant to requirements prescribed under the Debt Recast

Package Kingfisher Airlines' founder companies, United Breweries (Holdings) Ltd
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and Kingfisher Finvest Ltd, have pledged their entire stake in the airline with

certain of its lenders.

United Breweries (Holdings) Ltd held 199,598,555 shares (representing 40.1% of

total outstanding shares) in the airline and has pledged all the shares to lenders. At

the same time, Kingfisher Finvest Ltd held 63,478,570 shares (representing

12.75% of total outstanding shares) has pledged it's entire holding to the lenders.[37]

Delayed salary

Aug 2011: Kingfisher Airline has staff strength of 6,000 and spends 58 crore(US$11.02 million) on salaries a month. According to the first quarter financial

results, it has 173.66 crore (US$33 million) under the employees cost head, which

has increased from 163.40 crore (US$31.05 million) during the same quarter last

year.

Kingfisher Airlines has delayed salaries (for Jul 2011) of its employees in Aug

2011. The management stated that it does not have the money, and has not given

any date for the payment. Kingfisher airline had earlier stated that due to the bank

strike, the salaries could not be processed.

Employees were paid salaries on the 7th of every month. Earlier, the company used

to pay on the 31st.

Oct 2011: In the month of Oct 2011, salary payment for the month of Sep 2011 hadbeen delayed by Kingfisher Airlines. Salaries were normally credited to the

accounts of its employees on the 7th day of every month. It has also been alleged

that the tax company deducted from the salaries wasnt being paid to the tax

department.
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Nov & Dec 2011: The airline could not pay salaries to it staff in November and

December 2011. In protest, Kingfisher pilots started making in-flight

announcements citing "It is their sense of duty towards the guest that is making

them fly despite not being paid salaries for the past two months". Pilots have also

said that they plan to wear black armbands while reporting for work.

Fuel (ATF) Dues

HPCL: In Jul 2011, Hindustan Petroleum Corporation Limited (HPCL) stoppedthe fuel (ATF) supplies for about two hours to Kingfisher airlines owing to the

non-payment of dues. Situation was later resolved.[41]In the past several years,

Kingfisher airlines has had trouble paying their fuel bills.

BPCL: Bharat Petroleum Corporation in 2009 had filed a case againstKingfisher airlines for non-payment of dues. High court in an order said that the

entire amount ( 245 crore (US$46.55 million)) had to be paid by Nov 2010 and

the airline paid it in instalments.

Aircraft lease rental default

Since 2008, it has been reported that Kingfisher Airlines has been unable to pay the

aircraft lease rentals on time.

GECAS: In Nov 2008, GE Commercial Aviation Services threatened torepossess 04 leased planes in lieu of default. Kingfisher Airlines initially denied

that it missed the payments. GECAS had filed a complaint with DGCA saying

Kingfisher had defaulted on rentals for four A320 aircraft, and sought

repossession of the planes. In Jan 2009, The Karnataka High Court rejected

petition by Kingfisher Airlines to restrain GECAS from taking any step to
http://en.wikipedia.org/wiki/HPCLhttp://en.wikipedia.org/wiki/Hindustan_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/HPCLhttp://en.wikipedia.org/wiki/ATFhttp://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-40http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-40http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-40http://en.wikipedia.org/wiki/BPCLhttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporationhttp://en.wikipedia.org/wiki/High_courthttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/GE_Commercial_Aviation_Serviceshttp://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/A320http://en.wikipedia.org/wiki/Aircrafthttp://en.wikipedia.org/wiki/Karnataka_High_Courthttp://en.wikipedia.org/wiki/Karnataka_High_Courthttp://en.wikipedia.org/wiki/Aircrafthttp://en.wikipedia.org/wiki/A320http://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/GE_Commercial_Aviation_Serviceshttp://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/High_courthttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporationhttp://en.wikipedia.org/wiki/BPCLhttp://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-40http://en.wikipedia.org/wiki/ATFhttp://en.wikipedia.org/wiki/HPCLhttp://en.wikipedia.org/wiki/Hindustan_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/HPCL


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deregister and repossess the 04 aircraft in dispute. As a result, Kingfisher had to

return the A320 aircraft to GECAS.

DVB: In Jul 2010, DVB Aviation Finance Asia Ltd (a lessor from Singapore),sued Kingfisher Airlines for lease rental default. Case was filed in a UKcourt

on Jul 16, 2010 after Kingfisher did not pay for three month lease rental for

A320 aircraft it leased from DVB.

Airports Authority of India (AAI) default

In a written reply to the Rajya Sabha, Civil Aviation Minister Vayalar Ravi

informed that Kingfisher Airlines did not settle dues on a regular fortnightly basis

and that their exceeded the security deposit / bank guarantees available with AAI.

As per the details provided, as on June 30, 2011, Kingfisher Airlines owes 208.06

crore (US$39.53 million).

Net worth eroded & going concern

In Sep 2011, the Chairman & Managing Director of Kingfisher Airlines made

following disclosure to BSE;

The Company has incurred substantial losses and its net worth has been eroded.

However, having regard to improvement in the economic sentiment, rationalization

measures adopted by the Company, fleet recovery and the implementation of the

debt recast package with the lenders and promoters including conversion of debt

into share capital, these interim financial statements have been prepared on the

basis that the Company is a going concern and that no adjustments are required to

the carrying value of assets and liabilities".
http://en.wikipedia.org/wiki/Aircrafthttp://en.wikipedia.org/wiki/A320http://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/DVBhttp://en.wikipedia.org/w/index.php?title=DVB_Aviation_Finance_Asia_Ltd&action=edit&redlink=1http://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/UKhttp://en.wikipedia.org/wiki/DVBhttp://en.wikipedia.org/wiki/Rajya_Sabhahttp://en.wikipedia.org/wiki/Vayalar_Ravihttp://en.wikipedia.org/wiki/Bank_guaranteehttp://en.wikipedia.org/wiki/AAIhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/BSEhttp://en.wikipedia.org/wiki/Going_concernhttp://en.wikipedia.org/wiki/Going_concernhttp://en.wikipedia.org/wiki/BSEhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/AAIhttp://en.wikipedia.org/wiki/Bank_guaranteehttp://en.wikipedia.org/wiki/Vayalar_Ravihttp://en.wikipedia.org/wiki/Rajya_Sabhahttp://en.wikipedia.org/wiki/DVBhttp://en.wikipedia.org/wiki/UKhttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/w/index.php?title=DVB_Aviation_Finance_Asia_Ltd&action=edit&redlink=1http://en.wikipedia.org/wiki/DVBhttp://en.wikipedia.org/wiki/GECAShttp://en.wikipedia.org/wiki/A320http://en.wikipedia.org/wiki/Aircraft


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This filing was widely covered by Indian and international print and electronic

media and analysts. It was stated by analysts and media that the company needs

capital infusion to remain viable and this has pushed shares to near historic

lows.[50]

Kingfisher Airlines Lenders later stated that they consider that company is

viable.[51]

On 15 November 2011 the airline released poor financial results, indicating that it

was "drowning in high-interest debt and losing money". Mallya indicated that his

solution was for the government to reduce fuel and other taxes. The government

was engaged in assessing whether to bail out the company and other airlines or let

market forces determine which ones survive.

Bank account frozen

In December 2011, for the second time in two months, Kingfisher's bank accounts

were been frozen by the Mumbai Service Tax department for non-payment of dues.

Kingfisher Airlines owes 70 crore (US$13.3 million) to the service tax

department[53]. Indian tax body also stated that Kingfisher Airlines is delinquent[54]

As response, Dr. Vijay Mallya called on the Chairman of Central Board of Excise

and Customs and offered to pay up the dues by 13 Dec 11

Legal action by Excise & Customs

On 9 December 2011, S.K. Goel, chairman, Central Board of Excise and Customs(CBEC) announced that CBEC is considering legal action against Kingfisher for

not paying service tax.
http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-49http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-49http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-49http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-50http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-50http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-50http://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-52http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-52http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-52http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-53http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-53http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-53http://en.wikipedia.org/wiki/Vijay_Mallyahttp://en.wikipedia.org/wiki/Vijay_Mallyahttp://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-53http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-52http://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-50http://en.wikipedia.org/wiki/Kingfisher_Airlines#cite_note-49


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Winding up petition

Due non-payment, several Kingfisher's vendors had filed winding up petition with

the High Court. As on Nov 2011, winding up petition of seven creditors was

pending before the Bangalore High Court. In the past Lufthansa Technik& Bharat

Petroleum Corporation Limited (BPCL) had also filed winding up petition against

Kingfisher Airlines.
http://en.wikipedia.org/wiki/High_Courthttp://en.wikipedia.org/wiki/Bangalore_High_Courthttp://en.wikipedia.org/wiki/Lufthansa_Technikhttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/Bharat_Petroleum_Corporation_Limitedhttp://en.wikipedia.org/wiki/Lufthansa_Technikhttp://en.wikipedia.org/wiki/Bangalore_High_Courthttp://en.wikipedia.org/wiki/High_Court


21/27

Kingfisher Airlines posts Rs 577 cr loss on cost flap

Kingfisher Airlines has posted a net loss of Rs 577 crore in the financial year

ended March 2007, the balance sheet of UB Holdings, which owns the airline,shows. The loss was on a revenue of Rs 1,553 crore earned during the year. This,

incidentally, may well be the biggest loss posted by a major domestic airline

recently.

Kingfisher's more established rival, full-service carrier Jet Airways, had recorded a

marginal profit of Rs 28 crore in the same period while government-owned Indian

closed the year with a Rs 275-crore loss. Industry analysts estimate that domestic

airlines have lost around Rs 2,000 crore in 2006-07.

Kingfisher, now in its third year of operation, hopes to break even in 2008-09. But

analysts reckon that the going could get tougher, especially if the current cost

pressures continue even as the Vijay Mallya-owned airline attempts to chart its

international foray next year.

"The high cost is the main reason for the loss," said Kingfisher Airlines vice-

chairman Subhash Gupte. "Aircraft acquisition, depreciation, new routes, training

requirement and the spiralling cost of aviation fuel in India are the other reasons,"

he said. Kingfisher's failure to utilise aircraft capacity in full has also added to the

woes.

The carrier had started operations with four aircraft in May '05 and generated an

income of Rs 438 crore during the year ended March '06. It suffered a loss of Rs

240 crore that year. The company expects losses to fall gradually, especially as

new routes stabilise.


22/27

But despite the losses, Kingfisher continues to expand its network furiously. Just

last week, the airline announced the introduction of seven new sectors, adding five

new cities to its network. After these additions, it will have 238 departures daily

and serve 42 destinations with a fleet of 37 planes.

"Capacity on the domestic routes is still growing faster than demand," says Kapil

Kaul, India head of the Centre for Asia Pacific Aviation, a Sydney-based airline

consultancy. This is despite the Kingfisher-Deccan combine rescheduling fresh

aircraft induction for the next one year.

The group has a current market share of 30%, which Kingfisher claims makes itthe country's largest airline entity, ahead of Jet Airways and Jet Lite (the erstwhile

Sahara). Together, they connect 75 cities and offer over 558 flights daily with a

fleet of 80 planes. Incidentally, domestic demand grew 35% last year, primarily on

low fares charged by fiercely competing carriers. However, Kingfisher's planned

international foray will also add to the burden because of sizeable investments in

new offices, staff and airport infrastructure. Though it is still unclear whether this

will be done using the Kingfisher or Deccan flights, the routes could take up to one

year to turn profitable, said airline executives.

Also, the airline's flight path will be even more difficult because of the recent

addition in capacity on the India-US route by rivals like Continental, Delta, Jet and

Air India. The moot point is how soon the airline is able to turn around Air

Deccan. Air Deccan has been in the red since its inception, having accumulatedlosses of around Rs 420 crore. Kingfisher Radio, another UB Group firm, had

acquired 46% stake in Deccan Aviation this June. The prospects of an eventual

merger between the two carriers is on the cards.


23/27

Conclusion

After doing a study of this project representing on Kingfisher Airlines, I have come

to a conclusion that Kingfisher Airlines is one of the largest and most widespread

airlines of the country providing its services not only in India as well as outside

India also. It has alliance with many other airlines in this sector.

Kingfisher Airlines offers world class services to the customer at anominal rate. The national carrier takes immense pride in having successfully

played a pivotal role in making various facets of India popular with the people of

the world and acting as the countrys cultural ambassador. The airline uses the

services of one of the advanced plans been operated in the world.

To sum up I would like to say that Kingfisher Airlines is serving its

customer in an appreciated way and going to be in the list of best services

providers in coming years.


24/27

CERTIFICATE

The project report titled Reason for Kingfisher

Airline losses" PreparedbyANANDRAJ AHIRWAR, under

the guidance and supervision of Mr. Ajay Dwivedi

(Lecturer OF M.B.A. Deptt. Of S.S.H.C. JAIN I.M.R.) for

the partial fulfillment of the degree of Master of Business

Administrationis satisfactory in respect of :-

Comments By Supervisor Head of Deptt. Examiner

1. Contents and presentation

of the subject matter

2. Language

3. Embodies the original work

of the candidate.

4. Submission within due date

Signature of Examiner Signature of Supervisor

Signature of H.O.D.


25/27

DECLARATION BY CANDIDATE

I declare that the project report on Reason for Kingfisher

Airline losses"in Sagar Cityis my own work, conduct under the

supervision of Mr. Ajay Dwivedi (Lecturer OF M.B.A. Deptt. Of

S.S.H.C. JAIN I.M.R.) Affiliated to Dr. Hari Singh Gour Central

University, Sagar .To the best of my knowledge the report does not

contain any work which has been submitted for the award of any

degree, anywhere.

Signature of the Candidate

Anandraj AhirwarMBA 4th Sem


26/27

ACKNOWLEDGEMENTI would like to pay my sincere thanks to Mrs. Parul Guru Head of the

MBA Dept., S.S.H.C. JAIN I.M.R. Sagar for providing me the opportunity of

doing the project report.

I would to express my deep sense of gratitude to Mr. Ajay Dwivedi

(Lecturer of MBA SS.H.C. JAIN I.M.R. SAGAR) for his valuable guidance,

advises, Cooperation & Constant encouragement during the project preparation.

He is very supporting and without his help I would not have completed my

project report successfully.

I express my heartful thanks to Mr. Sumit Rathore, Mr. Sanjay Khare, &

Miss. Garima Chourasia and to the staff of S.S.H.C. JAIN IMR., Parents and friends

for their kind support and suggestion.

I am very thankful to retailer and customer whom I had approached for

collection of necessary data and who give their valuable time and comments,

which were the inputs for my survey.

Date: Anandraj AhirwarPlace: MBA 4th Sem.


27/27

PREFACE

The project report has an objective to get the MBA student

familiar with real life business situation and gives an opportunity to

the student of understand the theoretical concepts of marketing and

finance in practical way.

In todays world Consumer is the King consumer test and

preference go alone way in the actual sales of the product. Every

research work has to deal with various people in concern

organization and each of them have their own opinion and thinking

about various topics.

The main aim of the survey report was to determine the

Reason for Kingfisher Airline losses"

I tried my best to express the report through satisfactional

representation, graphs, pie diagrams etc. and it helped me to

enhance my knowledge I am extremely happy to place before our

esteemed teachers.

kingfisher financial turmoil

Documents