KINGFISHER AIRLINES CRISIS

SHWETA SHARMA 04215603911

OBJECTIVES
To create awareness regarding the crisis of Kingfisher airlines.
To obtain information regarding the crisis of kingfisher airlines. To extent knowledge.

To find out major areas, which has led to crisis?

Effect of Kingfisher Airlines crisis on Airline sector.

RESEARCH METHODOLOGY
Research is based on secondary type data collection which includes second hand data. Its collected via Newspapers Magazines Websites

KINGFISHER FLY THE GOOD TIME.

Kingfisher Airlines Ltd. (KAIR) is a private airline based in Bangalore, India. Owned by Mr Vijay Mallya of United Breweries Group. Kingfisher Airlines started its operations on May 9, 2005, with a fleet of 4 brand new Airbus A320. It started its international operations on 3rd September 2008 by connecting Bangalore with London.

Cont.
Kingfisher Airlines is one of the only seven airlines awarded 5-star rating by Skytrax. Kingfisher operates 400 daily flights with regional and long-haul international services. In May 2009, KFA carried more than 1 million passengers, giving it the highest market share among airlines in India. Until December 2011, KFA had the second largest share in Indias domestic air travel market.

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 of over 1,000 crores for three consecutive years. By early 2012, the airline accumulated losses of over 7,000 crores.

START OF THE CRISIS

The start of the crisis was the freezing of the bank accounts of the airline by the Income Tax Department. As on 10th Jan 2012, Kingfisher Airlines has service tax arrears of 60 crores. KFA has not been depositing service tax collected from passenger with the department since Nov 2011 on regular basis.

REASONS
It acquired loss making airline and fell into a debt
trap. It bought new aircraft when the industry suffered from heavy losses and low capacity Kingfisher was blinded by a desire to overtake Jet Airways and become the king of skies Price of Rupee Depreciating which has also to its crisis

CONSEQUENCES OF CRISIS
Its half of its fleet grounded. Salaries delayed.

Several members of its staff went on strike.

Kingfishers position in top Indian airlines on the basis of market share had slipped to last from 2 because of the crisis

DATA ANALYSIS

SWOT ANALYSIS
STRENGTH:

Strong brand value Support from parent company Add 1 million passenger created a year
WEAKNESSES: Financial issue due to heavy Debt. Eagerness to go International and buying loss making firm. Unable to generate expected returns on investment done. Overspending of funds.

OPPORTUNITIES: 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 have increased. THREATS: Rising fuel cost Govt. policies Least cost carrier.

STOCK ANALYSIS

DEBT STRUCTURE
YEAR Mar-12 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

Loss

-2328.01

-1027.4

-1646.22

-1608.83

-188.14 -419.58 -340.55 -16.79

Secured loans

5,368.76

5,184.53

4,842.43

2,622.52

592.38

716.71

448.16

159.42

Unsecured 2,661.24 loans

1,872.55

3,080.17

3,043.04

342.00

200.00

3.50

125.06

amount in Rs crores

COMPETITOR ANALYSIS
ATTRIBUTES Price KINGFISHER 25% higher than jet Airways NO JET AIRWAYS Lower than Kingfisher Airlines YES SPICE JET Extremely low

Permission to fly to US

NO

Permission to fly to UK

YES

YES
Both end customer

YES
Lower end customers

Targeted customer Both end customer

Positioning

Premium Domestic Segment

Premium Domestic Segment and International Segment

Lowest fares and no frills

RATIO ANALYSIS
Mar-12 CURRENT RATIO 0.81 Mar-11 0.76 Mar-10 Mar-09 0.78 0.64 Mar-08 0.97 Mar-07 0.80 Mar-06 Mar-05 1.01 1.51

DEBT EQUITY RATIO

EARNING PER SHARE

-2.18

-2.39

-2.04

-2.66

4.95

2.38

2.02

20.83

-40.30

-20.64

-61.95

-60.50

-13.85

-30.97

-34.69

-54.05

FINDINGS
1) Unplanned investment options. 2) Efforts to make the image of the Kingfisher Airlines top notch even after incurring heavy losses. 3) Proper and appropriate analysis of investment and the returns were not done. 4) Shortsightedness in terms to seeing the future uncertainty in the Aviation Sector. 5) Trapped in a debt trap and still trying to increase the burden with ill strategies.

CONCLUSION
DGCA as a regulatory authority have lacked the early sight of the crisis and worked for its stoppage. Debt trap should have been avoided so as to maintain flying. Management of Kingfisher Airlines competencies and efficiencies are questionable and the policies being followed are a big blot over the industry and is a lesson for future industries. Kingfisher closure could have been stopped if certain timely measure by the industry or regulatory authority would have been taken.

Thank You