kingfisherairlinesfinancialcrisis-121102115419-phpapp02

7/30/2019 kingfisherairlinesfinancialcrisis-121102115419-phpapp02

1/21


2/21

AGENDA

History Current scenario

Accumulated debt

Consequence of crises

Start of the crisis

Payment problems

Competitor analysis

Swot analysis Conclusion

Suggestion


3/21

HISTORY

Kingfisher Airlines Ltd. (KAIR) is a private airline basedin Bangalore, India.

Owned by Vijay Mallya of United Beverages Group .

Tag line- FLY THE GOOD TIME.

Kingfisher Airlines started its operations on May 9, 2005,

with a fleet of 4 brand new Airbus - A320.

It started its international operations on 3 September

2008 by connecting Bangalore with London.


4/21

Cont.. Kingfisher Airlines is one of the only seven airlines

awarded 5-star rating by skytrax.

Kingfisher operates 400 daily flights with regional andlong-haul international services.

In May 2009,KFA carried more than 1 millionpassengers, giving it the highest market share amongairlines in India.

Until December 2011,KFA had the second largest sharein Indias domestic air travel market.

First Indian Airlines to have in flight entertainment

systems on every seat with guest being able to watch TVin fli ht.


5/21

CURRENT SCENARIO

The DGCA suspended its flying license onOctober 20,2012.

KFA has temporarily shut down its operations .

Due to financial problem it has reduced the fleetfrom 63 to 16.


6/21

FINANCIAL CRISIS

The Kingfisher Airlines financial crisis refers to a series of

events that led to severe disruptions within Kingfisher

Airlines.

Ever since the airline commenced operations in 2005, it

has been reporting losses.

After acquiring Air Deccan, Kingfisher suffered a loss ofover 1,000 crore for three consecutive years.

By early 2012, the airline accumulated losses of over

7,000 crore.


7/21

CONSEQUENCE OF CRISES

Its half of its fleet grounded.

Salaries delayed.

Several members of its staff going on strike.

Kingfisher's position in top Indian airlines on the

basis of market share had slipped to last from 2because of the crisis.


8/21

START OF THE CRISIS

The start of the crisis was the freezing of the bankaccounts of the airline by the Income Tax

Department.

As on 10th Jan 2012, Kingfisher Airlines has

service tax arrears of 60 crore.

KFA has not been depositing service tax collectedfrom passenger with the department since

November 2011 on regular basis and instead has

been diverting it for other purpose on regular

basis.


9/21

ACCUMULATED DEBT

KFA has a debt of Rs 8030 crore.

KFA has been loosing money from day one and

has accumulated losses around RS 8000 crore.

Cumulative due exceeds Rs 15000 crore.


10/21

PAYMENT PROBLEMS

Kingfisher Airline has staff strength of 6,000 andspends 58 crore on salaries a month.

Airlines delayed salaries of its employees inAugust 2011, and for four months in succession

from October 2011 to January 2012.

Kingfisher also defaulted on paying the TaxDeducted at Source from the employee income to

the tax department.


11/21

Conti HPCL: In Jul 2011, Hindustan Petroleum Corporation

Limited (HPCL) stopped the fuel (ATF) supplies for

about two hours to Kingfisher airlines owing to the

non-payment of dues.

Bharat Petroleum Corporation in 2009 had filed a

case against Kingfisher airlines for non-payment of

dues(250 cr).

Since 2008, it has been reported that Kingfisher

Airlines has been unable to pay the aircraft lease

rentals on time.


12/21

Cont Kingfisher received a notice from the Airports Authority of India onFebruary 2012 regarding accumulated dues of 255.06 crore.

Kingfisher Airlines had not paid some bankers (Lenders) as per the DebtRecast Package (DRP) with lending banks.

By Feb 2012, Kingfisher has been declared NPA (Non-performingasset) by following banks

SBI

Bank of Baroda

PNB

IDBI

Central bank

BOI

Corporation Bank


13/21

BALANCE SHEET

SOURCE: MONEYCONTROL

1569.9

5868.07

4734.62

6314.965823.91

1781.46

5822.37 4747.51

5289.34

7651.81

-188.14 -1608.83 -1647.22-1027.4

-2328.01

-4000

-2000

0

2000

4000

6000

8000

10000

FY 08 FY 09 FY 10 FT 11 FY 12

INCOME

EXPENDITURE

PROFIT


14/21

COMPETITOR ANALYSIS

ATTRIBUTES KINGFISHER JET AIRWAYS SPICE JET

Price 25% higher than

jet

Airways and

Indian

Lower than

Kingfisher airlines

Extremely low

Permission to fly

to US

NO YES NA

Permission to fly

to UK

YES YES NA

IPO Floated Floated Floated

Targeted

Customer

Both ends of

customer

Both ends of

customer

Lower end of

customers

Positioning Premium

Domestic

Premium

Domestic

Lowest fares and

no


15/21

COMPARISION WITH

COMPETITOR

SOURCE:MONEYCONTROL

INCOME(CR)

EXPENSES(CR)

PROFIT(CR) TOTALASSET(CR)

KINGFISHE

R

5823.91 7651.81 -2328.01 2947.61

JET

AIRWAYS

15477.39 13369.66 -1236.10 12048.61

SPICE JET 4019.11 4541.62 -605.77 708.20

CONTAINER

CORP

4377.49 3037.22 877.88 5606.43


16/21

COMPARISION WITH

COMPETITORFACEVALUE(RS)

LAST SHAREPRICE

IN NSE(RS)

MARKETCAP(CR)

KINGFISHER 10 13.20 1067.51

JET AIRWAYS 10 350.65 3027.30

SPICE JET 10 34.40 1666.16

CONTAINER

CORP

10 1012.55 13161.41


17/21

SWOT ANALYSIS

STRENGTH: Strong brand value

Support from parent company

Add 1 million passenger created a year

Weakness

Financial issue due to heavy Debt.

Laying of employees caused a bad image.

Unable to generate expected returns on investment done.

Overspending of funds.


18/21

SWOT ANALYSISOpportunity:

The Indian aviation industry is growing at a rate of 24% per year.

Large number of domestic untapped routes.

Disposable income especially in middle class has increases.

Threats

Rising fuel cost.

Govt. policies

Least cost carrier.


19/21

CONCLUSION

Financial crisis of KFA was due to followingreasons:

High fuel prices.

Huge interest outgo due to heavy investment in purchase of aircraft.

Overspending/Expenses

Highly competitive industry

Business model was not effective.

Deregulation Act.

Recession-lose passenger(High operation cost due to low demand).


20/21

SUGGESTION

Foreign Investment .

Fuel efficient planes for shorter distance.

Improve revenue per passenger.

Avoid aggressive expansion of fleets.


21/21

THANK YOU

Date post:	14-Apr-2018
Category:	Documents
Upload:	rajat-goyal
View:	217 times
Download:	0 times

kingfisherairlinesfinancialcrisis-121102115419-phpapp02

Documents