Kfa investor presentation-march2010

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Transcript of Kfa investor presentation-march2010

  • 1. Kingfisher AirlinesMarch 2010

2. Table of Contents Section 1: Kingfisher Airlines Overview Section 2: India Aviation Market Section 3: Recent Performance and Continued Initiatives2 3. Section 1Kingfisher Airlines Overview 3 4. Kingfisher offers premium service with an efficient coststructure in the worlds most attractive aviation market Indian aviation market is on a recovery path and is poised for long-term accelerated growth Recovery in the market is underway (14% load factor growth, 11% yield growth, 30% pax traffic growth) Aviation is poised for secular growth of 15-20% (GDP growth at 8-9% Aviation growth 2x, 4 trips/100 people)15 20%8 9%,2x Irrational exuberance of capacity addition witnessed in the past is unlikely to recur (Air India likely to rationalizecapacity by 30%, All other airlines expected to add only 10-15 planes in next year on base of 260) Enabling conditions are improving; Significant upgradation in infrastructure of airports Indian market is unique; Transplanting global models in India has rarely worked Indian geography makes airline travel indispensable; Emerging demographic profile requires equal focus onmetro and Tier-2 cities; Higher growth likely inTier-2 cities which are typically located in 500-600km from keymetros After years of deprivation, Indian consumers are moving towards conspicuous consumption; deep-rooted classconscious mindset Large proportion of consumers continue to be indirect purchasers; leisure traffic is limited No cost advantage for LCC operators (No separate airports, same personnel costs, low ancillary revenue, limitedonline booking) Indian markets is more suited for short and medium-haul international routes at current fuel prices Slot constraints in metro airports create entry barriers for new players4 5. Kingfisher offers premium service with an efficient coststructure in the worlds most attractive aviation marketKingfisher offers a unique model which serves all Indian consumer segments & positions KFA to capture allgrowth opportunities in India Airbus and ATR fleet provides unique advantage to capture growth in metro, Tier-2 cities and international market Premium offering covering all consumer segments (Only Indian airline with 5-star rating) KF First for high end business & premium consumers (valet service, gourmet cuisine, stand-up bar & lounge) Kingfisher Class for business consumers (IFE, superior service) Kingfisher Red for value-conscious (Food on Board, Lounge access, FFP) Cost - competitiveness to ensure premium services are offered at value price points Cost difference with LCC would be limited to Food-on Board ($1.5) and GDS costs ($5)Kingfisher has developed unique advantage over its competitors Best lifestyle brand in the country supported by multiple UB group properties (e.g. Beer, Force India, IPL); 50 years of serving the Indian market provides unique consumer insights Largest Indian domestic carrier by market share; widest domestic network connectivity (~ 400 daily flights) to leverage growth across all segments (Highest frequencies in key metros; Maximum day-return products; 29 exclusive city pairs; 400+ connections)l i iti ti )(contd.)5 6. Kingfisher offers premium service with an efficient coststructure in the worlds most attractive aviation market(contd.) First carrier to enter Big-3 alliances One World; In addition, Kingfisher and Jet are the only private carriers currently to have approval for international operations ypp p Medium-haul routes connect to hubs of major participants in the alliance (HKG, LHR, SIN); These routes also serve large Indian diaspora All short-haul routes to neighboring countries served through cost-effective A320 which increase aircraft gg g utilization Innovative FFP program has attracted over 1.1 million members in 4 years (68% cabin penetration in First)Kingfisher is Indias most efficient and flexible Airline Consistently rated best on consumer satisfaction across surveys (rated higher than SQ in Asia) Best on-time performance amongst scheduled carriers (82%+ in Jan 10) Highest operational reliability of A321 fleet in world and one of the best technical despatch reliability in A320 fleet High aircraft utilization (~12 hrs on Airbus in a non red-eye market) Low employee/aircraft ratio at 115; Non-unionized workforce; Outsourced model ensures low fixed costs 25% of Airbus fleet is flexible; can be branded as Kingfisher Class OR Kingfisher Red based on market needs 6 7. Kingfisher offers premium service with an efficient coststructure in the worlds most attractive aviation market Kingfisher is now focused on ensuring sustainable and profitable growth Experienced management team is in place with deep aviation experience Rationalized capacity by > 20% during past 2 years; At the same time order book position will ensurelucrative growth to capitalize on demand uptick Steadily increasing Passenger RASK (21% increase from Rs 3.19 to Rs 3.86 over past 6 quarters);Several revenue enhancement initiatives identified and initiated, which would further enhance RASK Kingfisher Xpress cargo service, One Stop Connect campaign, code share agreements with key global carriers, updated FFP program, Internet Booking Engine, Revenue Management initiatives, One World Alliance Aggressive cost reduction plan targeted to reduce costs Rationalizing distribution costs, Reduction in expat pilots, renegotiating E&M vendor agreements, renewal of operating leases at 20% discount, additional operational efficiencies (fuel consumption, overheads) Balance sheet being restructured to re-phase and reduce debt Appointment of Seabury as advisors to identify further opportunities for efficiency enhancement Additional upside possible through policy initiatives like tax rationalization on fuel 7 8. UB Group Transparent Holding Structure (as on date) 51.8%Promoter Group UBHLHeld byHeld by Total Group UBHL PromotersHoldingand OtherGroup Cos.Real Estate (UB City)InvestmentsPegasus License USL 29.11% 6.65%35.76%UBL 12.62% 24.87% 37.49%KFA 60.58% 5.69%66.27% SpiritsBeer AviationOther InvUB37.18% 3.56%40.74%Engggg35.8%12.6%60.6% 10.2% MCF 24.51% 5.94%30.45%United Spirits UnitedKingfisher Aventis LtdBreweriesAirlines Ltd Pharma LtdAventis 10.22%- 10.22% Ltd100%24.5%50%Whyte & MangaloreMackayMillennium Chemicals &Fertilizers Ltd Alcobev37.2% UB EngineeringLtd 8 9. UB Groups Entry into AviationMay-05 Jan-05 31-May-07 UB Groups dominance of its core beverageKFA first flightKFA buys 26%business,business gave it unique strengths Apr-05 stake in Air Deccan Sharp understanding of the evolving [email protected] INR150/shareand behavior of the Indian consumer Jul-05 Ability to create premium products with true Oct-05value NNuanced understanding of operating i ad d t dif ti in Oct-0821-Jul-08highly regulated environment Indias largest Jan-08 Launches plans carrier with ~for international 28% marketApr-08operations and Aviation offered extra ordinary growth share Kingfisher First potential in an emerging economy like India Jul-08 UB group launched Kingfisher Airlines toleverage on its unique strengths Oct-08 Aviation business has been built on threeJan-10 Apr-09 1-Sep-08core competencies of the groupKingfisher dominates with Deccan to be renamed as Ability to deliver a unique experience while Jul-09widest network coverage Kingfisher Redremaining competitiveof about 63 citiesoperating over 375 flights Oct-09 Ability to manage scale upa day within India Ability to tightly manage costs Jan-109 10. Strong and Highly Experienced Management Team Chairman & CEO Dr. VijayMallyaOperations &In-Flight &Finance CommercialITEngineering Services A Raghunathan Manoj ChackoSourav SinhaHitesh PatelRajesh Verma CFO EVP CIOEVP EVP Currently leading Rajesh heads Guest Mr. A Raghunathan is a Manoj has over 18 years Sourav currently headsoperations andServices, In Flightqualified Chartered of experience in Indian andInformation technology atengineering at Kingfisher Services, Airports and Accountant with over threeinternational airlines and KFA and has over 17Airlines, Hitesh has over Security functions atdecades of work travel services. Heyears of work experience27 years of workKingfisher Airlines and hasexperience in finance and currently heads thewith airline systems andexperience in the Airline rich experience in the accounts. Before taking Commercial function at technology. Prior to joiningindustry. Prior to joiningAirline and Hospitalityover as the CFO ofKingfisher airlines and is Kingfisher, he spent 10KFA, Hitesh managed the industries. Prior to KFA, he Kingfisher Airlines, Mr. Aresponsible for the Sales, years with TCS and wasline and base maintenance worked with Jet AirwaysRaghunathan worked in Revenue Management,the head of IT departmentoperations at JetBlue for over 10 years. Rajeshsenior finance positions in Network Planning,at Qatar AirwaysAirways in United Statesy has also worked with the the liquor business of UB qy y Alliances and Loyaltyas a Director for over 6ITC-Welcome Groupgroup for 26 years. He is functions. Prior to joiningyears. Hitesh enjoys the responsible for Finance,Kingfisher, he has workedrecord of having Accounts, Legal,with American Expressmaintained the best fleetSecretarial, Purchase & (Travel services division)with the highest dispatchAdministrationand Emiratesreliability of Airbus A320sworld-wide10 11. Strong and Highly Experienced Management Team (contd.)Chairman &CEODr. Vijay MallyaCorporateHuman Resources Marketing Quality & Guest SecurityDevelopment &Rubi Arya Ravikant Sabnavis CommitmentMaj. Leslie MissalPlanning VPVPGaurav RathoreAVPAmit AgarwalA it A l AVPSr. VP Amit has recently joined Rubi heads the Human Ravikant currently heads Gaurav is responsible for Major Leslie is the head ofKingfisher as Sr. VP Resources function at the Marketing function at the Quality, Guestthe Security function atCorporate DevelopmentKingfisher