Kingfisher Airdeccan Merger

Mergers & Acquisitions

Marriage of

Presented by,

Rohit Mundhara P-21

Mayuresh Bhagwate C-05

Bijal Shah C-32

Aditi Sabaria C-31

Supriya Joshi P-13

Paritosh Gupte P-10

Monopoly of PSU’s

• New Industrial Policy 1991

• Air Corporation Act 1994

• Post liberalization period

Scenario after 1990’s

Entry Of

Private Players

Low Cost carriers

Consolidation

The Need Of The Hour

• Origin- Deccan Aviation Ltd.

• Growing demand of Air

connectivity

• Identifying potential Consumer

base

• The biggest challenge

Towards making Air travel more Comfortable

• E-ticketing• Cut on the Complementary service - food to passengers - no meals or company vehicles - no separate staff - route planning - outsourcing of ground operations - saving operating cost, landing cost &

sales tax

Generation of Additional Revenue

• Sale of food inside the aircraft

• Selling Advertisement• Differential ticket pricing• Non refundable tickets• No bulk discounts• Paid initial training to staff

• Dr Vijay Mallya identified the gap• Launched in 2005 by United

Breweries Group• Ready for take off with 4 flights a

day and a fleet of one Airbus320• Ushered a new era of luxury• Many international and national

awards

• Carved a niche for itself in a short span of time

• Only airline offering premium 1rst class service on domestic routes

• Modelled on the lines of US carrier Jet Blue

• Targets Sec A and socio-economic classes

• Great in-flight experience - Personal valet assistance in

luggage handling at airport - Personalised in-flight

entertainment system - Fashion models as flight

attendants - Designer flight interiors -Extendable footrests -3course gourmet cuisine

Clash of The Titans

MARS v/s

VENUS

Motivation for

Merger• Ever Increasing

Cost• Compromise on

quality hits the brand

• Unviable pricing• Competition

• Increasing costs• Difficulty in

maintaining brand image

• Competition from low-cost airlines

• Competition from International Airlines

Possible gains

• Routes network

• License to fly internationally

• Cash crunch• Leveraging

management and HR

Possible gains

• Economies of size• Rationalization of Personnel• Increase in Customer base

Possible losses

• Fundamentally opposite models• Impact on masses - -Fear of rise in fare prices -Ignorance of target audience• Loss of individuality

Final Merger Deal

LOSSES YEAR ENDED

Kingfisher Airlines

Rs.577crs 31st March,2007

Deccan Aviation

Rs.418crs 30th June,2007

DEAL STRUCTURE

• 1st Phase:- UB bought 26% stake at Rs.155

p.s. on 9th July,2007- Paid Rs.550crores

• 2nd Phase:- Open offer for additional 20% stake- Additional Rs.418crores

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Stock Prices of Deccan Aviation

Price

s

COST BENEFIT ANALYSIS

• Cash Paid = Rs.550Crs + 418Crs = Rs.968Crs

• Present Value of 46%stake = 62316254.28*137.5 = 856.85Crs

• Cost for kingfisher = Cash Paid-Present Value

= 968-856.85

=Rs.111.15Crs.

SYNERGIES

• Operational Synergy in the form of cost cutting(upto Rs.300crs.)

• Increasing market share(32-34%)• Have both direct and indirect

connectivity to the US, Europe and different Asian regions

SYNERGIES

• Received in writing slots to operate flights in San Francisco, JFK (New York) and Heathrow (London)

• These destinations will be connected non-stop from Bangalore, unique routes from India

• Also applied for Mumbai-Hong Kong, Mumbai-London and Delhi-Kathmandu routes.

The Aftermath – Post Merger Issues

• Different Cultures

• Expected Job Cuts

• Different Leadership Styles

contd...• Expected Industry impact

Further consolidation

Rise in fares

Greater shareholder value

Higher attrition rates in employees

Current Scenario

•Market Share

•Kingfisher airlines – Jet airways :- Strategic Alliance

•UB group ready to Divest

•SIPO’s & Rights Issue

•Financial Report

Current Scenario

•Delays in AirCrafts deliveries &Cancellation of Orders

•Industry Making Losses-Oil Concerns

• Infrastructure

Conclusion

The Industry has Witnessed tremendous

growth in the Past Decader Leading to

intense Competition in the Industry &

Setting the Stage for Consolidation

• Webliography – www.flykingfisher.com www.yahoofinance.com www.google.com www.bseindia.com www.businessworld.in