THE RISE OF GOOD TIMES

THE FLOW.Understanding Kingfisher

About Kingfisher Airlines Inception Parent company The Management

Problems with the ‘Dream Bird’ Operations The Deccan ‘Merger’ Poor Debt Management Macro-Economics

Reviving Kingfisher

Why Do we need to revive the king of Good times? Sector analysis

The Two Stage Revival Proposal Debt Restructuring and Stabilizing Kingfisher Delta Airways

ABOUT KINGFISHER AIRLINES.

KINGFISHER AIRLINES.• Founded in 2003*, its

parent company is United Breweries Group, headquarters in The Qube, Mumbai.

• Dr. Vijay Mallya, Chairman and MD.

• Domestic operations commenced in May 2005 and International in September 2008. And in October 2012 the DGCA suspended its licence.

MR. MALLYAIndian Businessman and PoliticianChairman of UB Group, Conglomerate of 60 companiesTagged as wilful defaulter by Union Bank and PNB in 2015

• As on 2011 kingfisher had the largest market share of 20% of the entire domestic aviation industry.

• Revenue was Rs. 5,493.41 Crores and Net loss of Rs. 2,328.01 Crores

2005 2006 2007 2008 2009 2010 2011 2012

-2500-2000-1500-1000-500

0

Reported Net Profit (in Crores)

2005

2006

2007

2008

2009

2010

2011

2012

2013

01000200030004000500060007000

Sales Revenues (in Crores)

20%

20%15%14%

7%

6% 18%

Market ShareIndigoKingfisherAir IndiaSpiceJjetJet LiteGo AirJet Airways

PROBLEMS OF THE‘DREAM BIRD’

EXPENSES.Includes:• Fuel costs• Employee cost• Amenities to customers• Finance Cost

Total Expenditure

MERGER WITH AIR DECCAN.• 550 crore acquiring

46%share in Air Deccan.

• Formation of Kingfisher Red which was LCC, a totally different airline.

• Cannibalized by Kingfisher red

• In 2011 closing down of Kingfisher Red to regain the market of Kingfisher airlines

CAPITAL STRUCTURE.

2005 2006 2007 2008 2009 2010 2011 2012 20130

2000

4000

6000

8000

10000

12000

Equity share capital Preference share capital Long term borrowings

80% Debt driven

DEBT.1600

800

800

650

550

410

320

310

15014090 60 50Bank Loans

SBI PNB IDBIBOI BOB CBIUCO Bank Corporation Bank State Bank Of MysoreIndian Overseas Bank Fedral Bank Punjab & Sindh BankAxis Bank

WHERE THIS DEBT WAS USED?

This debt was used to acquire Air Deccan for 550 Crores.To invest in fixed assets, leased aircrafts and air buses.To repay the debts and pay back creditors and employee salaries.

Some of the debentures were converted to preference and equity shares.

Unsecured loans were converted to secures loans by hypothecation of the tangible and intangible assets.

CAPITAL STRUCTURE.

2005 2006 2007 2008 2009 2010 2011 2012 20130

2000

4000

6000

8000

10000

12000

Equity share capital Preference share capital Long term borrowings

Debentures converted into preference and equity shares

MACRO-ECONOMIC FACTORS.Recession Increase in crude priceRigid and unproductive Government policiesPrice war

EFFECTS Total debt to banks – Rs. 7000 Crores, employee salary dues- Rs 1650 Crores

Aircraft lease and fuel dues and Income-tax dues got accumulated Kingfisher bank accounts were freeze. SBI declared it wilful defaulter PNB to sell the KF house IDBI and CBI - investigation No access to the hypothecated assets which included aircrafts. Delisting from stock exchanges. Suspension of license by DGCA. Resulted in bankruptcy of Kingfisher Airlines.

WHY DO WE NEED TO REVIVE KINGFISHER?To repay the loansFor the EmployeesFor the country’s aviation sectorFor the stake holders

SECTOR ANALYSIS. India expected to become the third-largest aviation market by 2020 and the largest by 2030.

In 5 years: Passenger Domestic traffic @12% and International @8%

Freight Traffic: domestic @12% and international @10%

Crisil Ltd. projected Rs. 8100 Crore of collective operating profit in 2016

Government initiatives: AAI plans to revive around 50 airports in 10 years

FDI limits proposed an increase from 49% to 50% along with tax incentives

S.W.O.T.Strength Willingness to revive Management of the bank

Weakness Very large debt Business model Management

Opportunities High sector growth Increase tourism Rise in demand Rise in exports and imports Reduction in fuel price Government Initiatives

Threats Competitors Gaining customer loyalty Gaining employees trust

THE BRAVE REVIVAL.Step 1. Debt Restructuring and Stabilizing Step 2. Kingfisher Delta Airways

BRING IN ROHIT NANDAN Joined Air India as chairman in 2011.

When he took charge the airline was making a Rs 1,800-crore loss over variable cost.

It then discontinued flights, restructured & improved route planning

Cash profit of Rs 6 crore in 2013-14 on international operations

WHAT DID HE DO?ProblemsStrikesBad FinanceUnpaid Fuel BillsHostility between employees of Air India and Indian Airlines

What do we suggest?

Solutions Identified and discontinued loss making flights

Restructured flying routes to make it more profitable

Emphasised on better selling strategies

Implemented Dharmadhikari Report, which places employees at par, reduced hostility

DEBT RESTRUCTURING.Convert Debt into Equity

Using SDR scheme introduced by RBI to help bank to take control

Converting debt of Rs.9402 Crores into equity.

17 Banks now the major stakeholders of Kingfisher airlines

Interest cost: Nil Rs. 4000 Crore of Follow-on public

offer

Using the capital raised: Fixed asses Capital WIP Current liabilities

RESERVES AND SHARE CAPITAL.

Mar 05

Jun 06

Jun 07

Mar 08

Mar 09

Mar 10

Mar 11

Mar 12

Mar 13

Mar 16

Mar 17

Mar 18

0

2000

4000

6000

8000

10000

12000

14000

16000

Share Capital

Mar 05 

Jun 06 

Jun 07 

Mar 08 

Mar 09 

Mar 10 

Mar 11 

Mar 12 

Mar 13 

Mar 16

Mar 17

Mar 18

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

 Reserves Total

REDUCING CURRENT ASSETS.

Mar 05 Jun 06 Jun 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 0

1000

2000

3000

4000

5000

6000

Total Current Assets

Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets

2016 2017 20180

200

400

600

800

1000

1200

1400

1600

Forecasted Total Current Assets

Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets

EXPENSES.Total Expenses Estimated Total

Expenses

Oil pricesLuxurious Amenities to customersFinancial cost elimination Rs.1430 Cr

FIXED ASSETS.

Mar 05 

Jun 06  Jun 07  Mar 08 

Mar 09 

Mar 10 

Mar 11 

Mar 12 

0

200

400

600

800

1000

1200

1400

1600

Total Fixed Assets

2016 2017 20183,000.00

3,100.00

3,200.00

3,300.00

3,400.00

3,500.00

3,600.00

3,700.00

Forecated Fixed Assets

SALES TURNOVER.

Mar 05  

Jun 06  

Jun 07  

Mar 08  

Mar 09  

Mar 10  

Mar 11  

Mar 12  

Mar 13  

0

1000

2000

3000

4000

5000

6000

7000

 Sales Turnover

2016 2017 20180

1000

2000

3000

4000

5000

6000

7000

8000

Estimated Sales Turnover

PROFIT BEFORE TAX.Mar 05  

Jun 06  

Jun 07  

Mar 08  

Mar 09  

Mar 10  

Mar 11  

Mar 12  

Mar 13  

-5000

-4500

-4000

-3500

-3000

-2500

-2000

-1500

-1000

-500

0

   Profit Before Tax

2016 2017 2018

-200.0

0.0

200.0

400.0

600.0

800.0

1000.0

Estimated Profit Before Tax

PARTNER WITH DELTA AIRLINES.NOW

DELTA AIRLINES.Click icon to add picture• Delta airlines is one of

the largest US airlines.• It is one of the oldest

airline industry more than 80 years old.

• Delta was itself in debt but revived successfully into a profit making airline industry, with the help of the 3 key people

• Own oil refinery, reducing the major expense in airline industry

• No hub in India• The Middle – east

airlines are in conflict with the US airlines.

BRING IN THE TEAM OF DELTA AIRLINES

Ed Bastian Glen HauensteinGil West

EDWARD H. BASTIANPresident and Director, Delta Air Lines, Inc. since 2010

He has served as Vice President of Finance, 1998Controller of Frito-Lay International Partner with Price Waterhouse in its audit practice for 13 years in entertainment, advertising, and manufacturing areas.

WHAT DID HE DO? Internal and external financial reporting, financial planning and analysis, Sarbanes-Oxley implementation to protect shareholders and the general public from accounting errors and fraudulent practices.

Implemented (Systematic Application Products) SAP financial systems at Delta, including process and organization and cost redesign.

@Ed Bastian

GLEN HAUENSTEIN

Joined Delta in 2005EVP, NETWORK PLANNING & REVENUE MANAGEMENTEx-VP Chief revenue Officer 2013-16

WHAT DID HE DO? Delta has added more than 70 destinations to its worldwide network

Substantially increased reach in Asia and Africa Invested in equity stakes in Gol and Aeromexico to significantly enhance Delta’s presence In the fast-growing Latin region

 Added 100 flights and 30 new destinations at New York’s airport for business travellers

Significantly increased Delta’s footprint on highly important business routes between the US and the UK

@Glen Hauenstein

GIL WEST Joined Delta in March 2008COO and Senior Executive VP of Delta Air Lines Inc. since March 1, 2014 and February 3, 2016 respectively.

WHAT DID HE DO?

To Lead the team responsible for safe, reliable operations across the globe, including more than 70,000 employees in Airport Customer Service Corporate Safety Security and Compliance Delta Connection Delta Global Services .. ETC 

@Gil West

AND,HOPE FOR THE BEST!Thank you. Any Questions ?