The King Without Fishes

8/12/2019 The King Without Fishes

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THE KING WITHOUT FISHES...!!!

[CASE ON CRISIS OF KINGFISHER

AIRLINES]


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INTRODUCTION:

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

Owned by Vijay Mallya of United Beverages Group .

Kingfisher Airlines was established in 2003.

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.


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Kingfisher operates 400 daily flights with regionaland long-haul international services.

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

Until December 2011,KFA had the second largestshare in Indias domestic air travel market.

First Indian Airlines to have in flightentertainment systems on every seat with guestbeing able to watch TV in flight.


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Cont..

Kingfisher Airlines is one of the only seven

airlines awarded 5-star rating by skytrax.

Named Best Airline In India / Central Asia;

Best Cabin CrewCentral Asia.


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VISION

The Kingfisher Airlines family will

consistently deliver a safe, value-based and

enjoyable travel experience to all our guests.

MISSION

"Kingfisher Airlines will have 'Fly the Good

Times' approach and this will reflect in the

experience we will offer to passengers."


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STARTING OF THE CRISES:

Ever since the airline commenced operations in2005, the company is reporting the losses. But thesituation became more horrible after acquiring theAir Deccan in 2007.

After acquiring the Air Deccan, the companysuffered a loss of over Rs. 1,000 crore for threeexecutive years

By early 2012, the airline accumulated the lossesof over Rs. 7,000 crore with half of its fleetgrounded and several members of its staff going onstrike.


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DEBT RESTRUCTURING:

Due to heavy burden of debt and interest, in

November 2010, the company adopted the

way of debt restructuring and under that total

18 leading lenders, those have landed total Rs.

8,000 crores, agreed to cut interest rates andconvert part of loans to equity


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converted Rs. 650 crores debt into preferenceshares which will be converted into equity

when the company lists the on theLuxembourg Stock Exchange by selling globaldepositary receipts (GDR).

Besides the 1,400 crore debt which will be

converted into preference shares, another 800crore debt has been converted intoredeemable shares for 12 years.

Due to debt restructuring, the company ableto down the average interest rate to 11% andto save Rs. 500 crores every year in interestcost


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CRISIS TILL CONTINUE:

Debt restructuring also couldnt change the

game. By restructuring, company had reduced

the interest charges by Rs. 500 crores every

year, but due to the high leverage condition

and increase in cost, the company started to

face the liquidity problem.


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In adequate w.c created Problems

DELAYED SALARY:

Kingfisher Airline has staff strength of 6,000 and

spends 58 crore on salaries a month.

Kingfisher Airlines delayed salaries of itsemployees in August 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.


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Kingfisher employees to go on hunger strike,

stop Airlines to Many areas.


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FUEL DUES: BPCL: Bharat Petroleum Corporation in 2009 had

filed a case against Kingfisher airlines for non-payment of dues. High court in an order said that

the entire amount 245 crore had to be paid by Nov

2010 and the airline paid it in in stalments.

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. Situation was

later resolved


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AIRCRAFT LEASE RENTAL DUES:

Since 2008, it has been reported that Kingfisher

Airlines has been unable to pay the

aircraft lease rentals on time.. Here are the

some major issues with:

GECAS: In Nov 2008, GE Commercial Aviation

Services threatened to repossess 04 leased

planes in lieu of default. Kingfisher Airlines

initially denied that it missed the payments


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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.


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AAI REPORTS:

: Kingfisher received a notice from theAirports Authority of India on February 2012

regarding accumulated dues of 255.06 crore.

The airline was operating on a cash and carrybasis for the last six months, with daily

payments amounting to0.8 crore.


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SERVICE TAX:

On 9 December 2011, S.K. Goel, chairman,

Central Board of Excise and Customs (CBEC)announced that CBEC is considering legal actionagainst Kingfisher for not paying service tax. Ason 10th Jan 2012, Kingfisher Airlines has service

tax arrears of 70 crore.

The Ministry of Finance has given a concessionto Kingfisher and instructed them to pay the

dues by 31st Mar 2012. In Jan 2012, Kingfisherpaid 20 crore towards its dues for December2011 and part of the arrears


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BANK ARREARS:

Till the end of Dec 2011, the arrears were

estimated to be 260 crore to 280 crore.

SBI is largest creditor and the leader of the

consortium of banks in the DRP (Debt Recast

Package) and has an exposure of 1,457.78 crore. HC rejects Kingfisher Airlines' plea against move

by banks to cease propertiesdec-2013
http://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstructionhttp://articles.economictimes.indiatimes.com/2013-12-12/news/45123064_1_kingfisher-house-banks-securitisation-and-reconstruction


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Feb 2012, Kingfisher has been

declared NPA by following banks:

State Bank of India

Bank of Baroda

Punjab National Bank IDBI

Central bank of India

Bank of India Corporation Bank


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FROZEN BANK ACCOUNTS

On March 3, 2012, The Central Board of Excise

& Customs of India froze many more

Kingfisher accounts as it was unable to pay all

the dues as per schedule.

Kingfisher was meant to pay 1 crore per

working day.


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IATA SUSPENSION:

On March 7, 2012 IATA suspended ticket salesof Kingfisher airlines citing non-payment of

dues.

IATA also immediately directed all travel agents

to stop booking tickets for Kingfisher. This

would affect Kingfisher's business by around

30%.


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Strategic risk Market Analysis


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Strategic risk Merger With Air Deccan


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Financial Risk Excessive Debt


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Operational Risks Fuel Costs


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Net profit

SOURCE: MONEYCONTROL

4734.62

6314.965823.91

683.46

4747.51 5289.34

7651.81

3309.65

-1647.22

-1027.4-2328.01

-4301.12-6000

-4000

-2000

0

2000

4000

6000

8000

10000

FY 10 FT 11 FY 12 FY13

INCOME

EXPENDITURE

PROFIT


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QUESTION FOR DISCUSSION:

1. Is the Problem of Kingfisher Airlines Industry

Specific or Company Specific?

2. What is the Impact of High Level of Debt onthe operating performance of company?

3. Should Government bailout Kingfisher

Airlines?

4. According to you, what are the possible ways

for the company to overcome this situation?


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THANK YOU

The King Without Fishes

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