“Kingfisher Airlines update”October 2008

2

Agenda

• UB Group: The growth story (slide 3)

• Airline Industry Overview (slide 9)

• Kingfisher Airlines Overview (slide 18)

• KFA Financials (slide 25)

• KFA Outlook (slide 31)

31st October 2008

UB Group: Growth Story

3

SUCCESS MANTRAS • India’s Leading branded consumer group• Has dominated domestic market

− Accelerated organic growth− Acquisitions

• Is Globally Competitive• Has set standards of governance and transparency

UB Group’s growth story

31st October 20084

What next?

Bought GilbeyGreen lablel

BUILT BRANDS LIKE

KINGFISHER, BAGPIPER,

BLACK DOG …

Acquired 26% in Deccan Aviation-

Announced merger of KFA with

Deccan,; Acquired further 3% stake in Deccan Aviation to increase the holding

to about 50%

2003 2005 20072002 2007

Merged Hebert-sons into MCD

Kept acquiring smaller players in beer and liquor

industry.

Acquired further 20% stake in

Deccan Aviation through open offer

Brought in Scottish New Castle

Market gave thumbs up as

Margins doubled to 18% because of

synergies

Consolidated Beer business under UBL and liquor business under

USL

Acquired Shaw Wallace

& Co Ltd

Acquired 100% stake in Whyteand Mackay,

worlds 4th largest scotch company

UB group has become the market leader in each core business it has ventured into

Announced Alliance with Jet Airways

2008

KFA merged in DAL and the

merged entity renamed as Kingfisher

Airlines Limited

No. 1 Beer in India

No. 1 Spirits in India

No. 1 Airline in India

UB Group

TIMELINE

31st October 2008

• Multiple legal entities

• Primarily volume focus

• Growth driven by market share across segments

• “Spirits” player

• Focus on India

• Focus on annual performance

• EBDITA 8.50%

3 Years ago

• One legal entity• Primarily top-line and

profitability focus• Growth driven by

increased “premium-ness” of the portfolio

• Integrated player across spirits and wines

• Global ambitions –pragmatically calibrated

• Accountability for 3 year strategic plan

• EBDITA 22%

*Source – Economic Times

Now• Strong EBITDA growth• World’s No.3 distiller • 17 Millionaire brands • McDowell No 1 family is the largest spirits brand

in the world with sales of 27.6 million cases( FY 2008)

• McDowell No1 family becomes the largest FMCG brand in terms of retail sales value*

• Mc Dowell No 1 Brandy – Worlds largest selling brandy

• Bagpiper Whisky – largest selling in the world• Pan-Indian presence - largest manufacturing/

distribution set up• Leadership across flavors, geographies and price

points• Export unit targeting Indian communities living

abroad

United Spirits Limited

31st October 20086

United Breweries Limited

• Sold in over 52 countries.

• UBL is the largest beer company in India with a market share in excess of 45%

• India’s first global consumer brand: Kingfisher

• Balanced portfolio of supporting brands

• Manufacturing network across all major states

• Established trade relationships

• Shares common distribution system with Spirits company

31st October 20087

Aviation

• Rated Asia Pacific’s most admired airline brand

• 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

• Recognized as one of India’s Most Respected Companies in 2006 and 2007 – Business World

• Voted India’s Favorite Airline. India’s only 5 star accredited airline

• International ops commenced September 2008

• Current Fleet size of 86 aircraft (50 Airbus NBs and 36 ATR’s). Market Share of 27.5%. Network coverage of 64 cities operating over 400 flights a day. Over 34 million guests flown since inception.

31st October 20088

Indian Airline Industry Overview

9

• $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 aviation1

• Impact on indirect industry is estimated at 1-1.5 times size of aviation industry2

• Improved connectivity results in higher GDP growth• $100 spent on air transport produces benefits worth $325 for the economy1

• Improves economic productivity of passengers (estimated at 50% of ticket prices3)

• Creates significant employment potential • Direct ~ 100,000• Indirect ~ 6 times1

1. Naresh Chandra Committee Report2. Port Authority report on New York aviation market3. IATA report

The economy looks up when we fly

31st October 200810

A JLA M D

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India’s air service connectivity has room to grow: 129 new routes connecting 22 cities were added from 2000 to 2007

Domestic Routes in 2000 Domestic Routes in 2007

Source: OAG Schedules, Bombardier Aerospace, 2007

Huge Potential

31st October 200811

In the past few years, domestic industry has grown at CAGR of 31%

Enabling the following macro economic conditions would ensure continued growth:

• Economy is expected to continue to grow at 8-9%; Aviation business is directly impacted by same

• Adequate investments in infrastructure are being made in key airports to enable them to handle 2-3 times the current passenger loads by 2010

• USD 1.25 Bn. of investments in non-metro airport development would drive growth in the market

Annual domestic passenger traffic (mn)

18.524

35

44

0

15

30

45

60

Mar-05 Mar-06 Mar-07 Mar-08

Indian Aviation Industry growth to exceed 25% CAGR

KPMG report states that India’s air traffic will exceed the projected 25.4% CAGR for 2008and expected to grow 2-3 times by 2012

31st October 200812

ATF prices are ~ 50% higher than international markets(Estimated impact $ 1.5bn)

Tax incidence ~ 50% on base price

In contrast, the rest of the transportation industry has access to fuel at subsidized rates ~ 29% subsidy on petrol and 47% on diesel

Additional fuel consumption of ~10% due to airport congestion (Estimated impact $0.5bn)

High airport handling charges

AAI is highly profitable (PBT margin of 40%; PBT at $ 400mn)

Route disbursal guidelines require airlines to fly in unattractive sectors (~ 300 flights in NE; estimated impact for KFA is USD 23 million p.a.)

As a result airline companies are incurring heavy losses while govt. and service providers are significantly gaining at its expense

• Central & State Govt. – $1.5bn (Excise duty, Custom Duty, Sales-tax, Entry tax)

• Fuel companies – $ 0.6bn+ (Margin on ATF)

• AAI – $ 0.4bn

Despite its economic significance, growing contribution to Indian economy and increasingly adverse fuel situation, theindustry has been subjected to significant disadvantages

Airline industry: India vs. International

31st October 200813

Country No of prominent players*

Market share of Top-2

Industry Load

Factor

Comparative metro fare (USD)

Fuel Price (USD/ltr)

Australia 2 95% 80% 155 - 548 1.02

Japan 2 93% 65% 286 - 310 1.07

Brazil 3 92% 72% 238 - 440 1.00

UK/I 5 60% 73% 179 - 952 1.12

China 4 47% 75% 107 - 143 1.10

India 5 59% 65% 102 - 210 1.67

Industry consolidation would be driven through exit of fringe players and rational capacity addition linked to demand by existing players in the near term. This would assist in driving-up load factors and realizations

Consolidation to pave way for rationalization

* All fares for key metro sectors across countries equated to DEL-BOM distance (1167Km). Fares for Aug 18th from local airline websites; Fuel prices for Jun08 31st October 200814

Impact of the first round of consolidation

Implications

Industry loses $500 M

9 carriers reduce to 3 players

Top 3 players control over 80% market

Industry loses $500 M

9 carriers reduce to 3 players

Top 3 players control over 80% market

ImplicationsImplications

Industry loses $500 M

9 carriers reduce to 3 players

Top 3 players control over 80% market

9 carriers reduce to 3 players

Top 3 players control close to 80% of the market

Jet Group, 32.6%

Indian / Air India, 18.1%

UB Group, 27.5%Go, 1.8%Spice, 7.9%

Paramount, 1.7%MDLR, 0.2%

Indigo, 10.1%

As on Sep 2008

31st October 200815

Kingfisher Airlines and Jet Airways announced an agreement to form an alliance of wide-ranging proportions that will help both carriers to significantly rationalize and reduce costs by offering a unique high product quality with improved standards of service to its consumers.

=

Jet Airways & Kingfisher Airlines working together

31st October 200816

UB group has a history of successfully managing highly regulated, capacity surplus industries and turnaround acquisitions

• Spirits business in India is characterized by− High fragmentation− Over capacity− Market segmented by multiple price points

• Industry had single digit margins and falling price points

• McDowell & Company Ltd, the flagship spirits company of the UB group acquired a number of companies including its immediate competitor Shaw Wallace in 2005

• Post this acquisition, UB has focused on realizing value both insales, and aggressive cost reduction

• Achieved ~ 50% share of volumes in the segment United Spirits operates and 60% share of value

• Latest EBITDA margin 22% (similar to major multinational companies)

• Growth across all categories and across all geographies in India

• Acquired 100% of Whyte & Mackay Ltd., the fourth largest scotch manufacturer in the world, based out of Glasgow, Scotland

• Today, United Spirits is the third largest distiller in the world, behind Diageo and Pernod Ricard

Current Indian aviation industry scenario is similar to spirits industry 5 years ago

31st October 200817

Kingfisher Airlines Overview

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Unique high product quality with low costBest brands in the Airline Industry

• KFA is the 2nd ‘Buzziest Brand’ in the country

• Deccan voted the “Best Indian Budget Airline”*

Best product in the Skies

• Only airline in India with a 5 star rating (six in the world)

• KF Ranked highest in cabin comfort & on-board service

Highly satisfied & loyal customer base

• 99% of KFA guests recommend the airline

• DN loyalty index highest compared to other LCC’s

Leading Industry though innovation

• In-flight : Entertainment & gourmet cuisine

• Ground service : Personalized valet service

• Distribution : Mobile, home delivery, post office etc.

• DN leading LCC cabin innovations: In-flight reading

31st October 200819

• Business traveler/Premium traffic/SME traveler/Leisure traveler• Full service/frequency/Low fare• Focus on premium routes/low yield routes

• The airline has the widest network in India, flying to all major business & leisure destinations in the country covering > 95% of the addressable passenger base

• “Uniquely flexible” strategy to benefit from higher realizations on business routes and transition to low cost if yield declines

Kingfisher Airlines Limited

Differentiated Network Coverage

31st October 200820

• KFA fleet plan is based on A320 which remains a high value/high demand asset− Group has current Airbus fleet size of 50 and net addition of 10 aircraft till Mar 2011− There is a shortage of A320 in global markets; 166 orders of narrow bodies in the recently concluded air show− This provides the flexibility to contract in short-term while maintaining longer-term growth potential− No ATR additions in the current year

• KFA has been on the industry forefront to reduce deployed capacity− Overall reduction of 21% flights− 7 aircrafts rendered surplus as a result of the exercise

• Pro-active actions by KFA are influencing other airlines to rationalize capacity− Spicejet, Indigo and Go have reduced capacity by more than 20%− Jet has cut ~10% capacity; Jetlite has cut capacity by ~ 15%

KFA’s fleet plan has tremendous flexibility

31st October 200821

Proactive steps: Capacity addition

• Potential route deployments planned for wide body aircraft• A 330

− BLR – LHR− BOM – LHR − BOM – SIN− BOM – HKG

• Wide body Fleet status− 5 A340s replaced by A330− No further wide body aircraft induction for the next 2 year

• Conducted detailed assessment of route traffic potential based on data sources like IATA Pax-IS, MIDT

• Analyzed route wise competitive market share, product, schedule

• Defined class-wise projections on pure O&D traffic and feeder markets

• Analyzed market ATVs from a point-of- sale perspective • Assessed the impact of Kingfisher market entry on route

capacity• Defined detailed projections of all operational and fixed costs at

multiple fuel price scenarios

Potential deployment opportunities based on detailed route wise profitability

Approach to detailed Route wise profitability assessment

31st October 200822

KF is leading the industry towards a structure where Vendors to Airline companies make only a reasonable return

CURRENT RETURNS PROPOSED

Fuel companies & state governments

Returns for fuel companies and tax revenues for govt.- Rs 18-20/ ltr

Savings of Rs 9-10 / litre targeted through sales tax and discounts of Rs 2/ ltr

Airline travel agents 4-5% of ATV from Airline company Standard rate of Rs 125/ ticket from customers (50% reduction)

Distribution providers (GDS)Rs 130/ booking Rs 70 cr.

20% reduction

Catering companies - NIL - 20% reduction

Other opportunities:Airport Authority of India

AAI operating profits at 40%Current profits ~ Rs 400 cr. p.a.

Reduce current landing charges by 50%; representation by industry supported by civil aviation ministry

Above initiatives except AAI opportunity would lead to savings of over Rs 50-55 cr/ month

31st October 200823

Further reduction in non-fuel costs is being targeted

• Targeted cost synergies expected have accrued/on-track (Ground handling, Airports, Maintenance, Pilots, Flight Operations, Insurance)

• Several other cost reduction measures initiated (reducing dependence on expat engineers and pilots, hotel costs, discretionary training, uniforms etc.)

• Headcount per aircraft targeted to be reduced from 104 to 94 by leveraging synergies

Non –fuel costs targeted to be reduced by 7 - 10%

31st October 200824

What is the impact on the KFA Financials?

25

26

• The spiraling fuel costs have created an unprecedented and adverse impact on the operations

• The average fuel price in the six month period April to September 2008 has increased by close to 60% and this increase resulted in an impact of INR 640 crores on the Company’s fuel bill. The average per kiloliter price in this period (H1 FY09) was INR 61,400.

• The Company in order to overcome these increasing costs was constrained to pass on a part of the costs to the traveling customer in form of higher fuel surcharges resulting in increased pricing to the customer.

• The increase in fares coupled with the lean season (June to September) witnessed a drop in passenger traffic and corresponding seat factor not just for the Company but also for the industry. The period saw Kingfisher’s seat factor dropping in line with the industry by about 6%.

KFA Results: H1FY2009 Highlights

31st October 2008

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In order to manage this challenging scenario, the Company has initiated various measures to manage costs:

• Network alignment on merger and continuous review of poor performing flights, has resulted in a reduction in capacity to the extent of around 4% during this 6 month period with further reductions planned.

• The reduction of capacity was achieved more in the second quarter of this year i.e. July to September 2008 where the reduction achieved was close to 15% as compared to Q2 FY08 i.e. July to September 2007.

• As a result of this exercise, the Company has returned 2 aircraft and is in discussions to return an additional 8 aircraft. The impact of these returns will be seen in H2 FY09.

• Deferred international roll-out plans apart from one flight operating between Bangalore and London. Reduced deployment of wide-body aircraft in the near term.

KFA Results: H1FY2009 Highlights

31st October 2008

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Reduction in fixed costs in the merged scenario

• Operating costs – Catering, Insurance, Engineering and Ground Handling –reduced through re-negotiations with various service providers

• Employee Costs

Reduction of expat employees in particular high cost engineers and pilots

Higher attrition rate coupled with voluntary movement of employees in the merged scenario (overall 650 employees). Improved cross utilization led to no increase in manpower

KFA Results: H1FY2009 Highlights

31st October 2008

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KFA Results: H1FY2009 Highlights

• Operating Revenues of INR 27,203 millionsUp 33% over 6 months FY08 (H1FY08)

• Average Ticket Value per Passenger 4,936Up 55% over 6 months FY08

• Net Profit / (loss) after tax of INR (6,411) millionsLosses reduced by 19% over 6 months FY08

• Achieved Seat Factor of 62%Down 6% (points) over 6 months FY08

31st October 2008

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KFA Results: H1FY2009 Highlights

31st October 2008

Company Operating Parameters

H1FY09

ASKMs Mio 7,745RPKMs Mio 4,813Passenger Load Factor % 62%Total Guests Revenue Mio 27,172Revenue per Guest 4,936

Traffic Paramters April - Sep 2008 (6 months)

Consolidated

Company P&L

H1FY09

INCOMEIncome from Operations 27,203Other Income 421Total Income 27,624

ExpenditureEmployee Remuneration & Benefits 4,262Aircraft Fuel Expenses 17,100Other Operating Expenses 12,143Aircraft Lease Rentals 5,376Depreciation 649Interest Expense 2,460Maintenenace Rent Reversed (5,262)Total Expenditure 36,728

PROFIT / (LOSS) BEFORE TAX (9,104)

Provision for Taxation (2,693)

PROFIT / (LOSS) AFTER TAXATION (6,411)

In INR Millions April - Sep 2008 (6 months)

Consolidated

KFA Outlook

31

• The softening of the fuel prices has resulted in an improvement in the Company’s performance in September 2008 (fuel prices reduced by 15.5%). Given the further drop in fuel prices, the Company expects a better performance in H2 FY09.

• The recently announced alliance between Kingfisher Airlines and Jet Airways is expected to help both carriers to significantly rationalize and reduce costs by offering a unique high product quality with improved standards of service to its consumers.

• The two airlines will be able to derive maximum synergies by working together and thereby offer best possible fares for the benefit of the end users i.e. the travelling customer.

KFA - Outlook

31st October 200832

The scope of this alliance is expected to include the following on the operational and cost aspect:• Joint fuel management to reduce fuel expenses• Common ground handling of the highest quality• Common Global Distribution system platform• Cross utilization of crew on similar aircraft types and commonality of training as also of the technical resources, subject

to DGCA approval

Areas covered on the revenues and revenue related operational aspects are :• Code-shares on both domestic and international flights subject to DGCA approval• Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82

International flights daily• Joint Network rationalization and synergies• Cross selling of flight inventories • Reciprocity in Jet Privilege and King Club frequent flier programs

KFA - Outlook

31st October 200833

• Further Consolidation would result in exit of fringe players; rational capacity addition and viable pricing

• Growth potential of aviation in the country is expected to remain intact

• Fuel prices are expected to stabilize to around $70-90 /barrel in next 6-12 months

• KFA is the cost player in the industry with best product offering

• KFA offers a flexible network strategy which provides it a distinct competitive advantage

• KFA has prepared a pro-active plan to overcome difficult fuel situation

Kingfisher Airlines would emerge a stronger airline in the next 6-12 months from the current situation

In Summary…

31st October 200834

Thank you