A Project On Kingfisher Airlines

Team Members:Neha KulkarniSwakul NaikShrutika Sawant

INTRODUCTION

Kingfisher Airlines acquired 26% stake in Air Deccan’s parent company Deccan Aviation.

A combined fleet of 71 Airbus A320 Aircraft operate 537 flights to 69 Indian cities.

Kingfisher served the corporate and business travel segment.

The major participating factor behind the deal was chance for kingfisher to go international within first 5 years.

Problems faced by KingfisherKingfisher Red with high class services lead o costs shut up.Due to the high cost the prices of tickets had increased.Kingfisher failed to understand that customers were more interested in reduced prices than services.The Airlines Strategy Failed to understand customer needs.

Cont……

Another problem it focused more on international services than domestic which lead to investing ample of cash.Restructuring of routes of Air Deccan which lead to cost sensitive and thus people shifted to economical variants like spicejet and indigo.

Consequences of ProblemsThe airline today is saddled with total debt of Rs 8000 crore.Kingfisher was forced to take a loans form Banks which now have a total exposure of Rs.7000 crore.The airlines missed out to raise Rs. 1000 crore through global depository receipts.It is also struggling to meet its working capital needs.It owns close to Rs.7600 crore to 14 banks.It reported a net loss of Rs. 469 crore for September quarter because of increase in fuel prices and inability to hike fares due to competition.

Cont….

The bank accounts have been frozen by income tax authorities.The frozen account has disrrupted payments to suppliers, salaries to employees.This led to employee strikes and cancellation of flights and also closed down its low cost carrier Kingfisher Red.

Risk Management Failure

Strategic Risk – Market Analysis Strategic Risk – Merger with Air Deccan Strategic Risk - Investment in Planes Financial Risk - Excessive Debt Operational Risk – Fuel Costs

Is the problem still existing?

The problem is still existingCancellation of flights, Resignations of pilots, Passengers' dissatisfaction and Pressure of Directorate General of Civil Aviation (DGCA) are the prime concerns that continue to trap the king of good times. The salaries of pilots have not been given for the last two months, forcing the frustrated staff to go on strike. Till date the airline has accumulated a loss of more than Rs 6000 crores.

Why are the problems still existing?

Oil companies like IOC, BPCL and HPCL have already taken their hand back from Kingfisher to supply jet fuel, leaving the airline struggling to streamline its daily requirements. Oil is the primary expense for the business and its increased price in the recent past has also contributed for the loss of revenue for the Kingfisher and the airlines cannot control this.Now lenders are firm on not assisting the Kingfisher airlines further unless the company clears all its previous dues. Banks now find it difficult to provide more funds to the financially starved airline and defend its actions.

The worst of worse The airline is not able to pay the staff or the Airports Authority of India refuses to give credit to the airline, it can get its license suspended. As Kingfisher Airlines failed to meet the deadline for clearing dues, the service tax department has frozen some more bank accounts of the king of good times, Kingfisher. The airline was asked to pay Rs 10 crore as arrears within a week but again due to the missing of deadline, the Central Board of Excise and Customs froze most of its accounts.Kingfisher is badly trapped due to the big money losses.The nonpayment of TDS too has resulted in the freezing of bank accounts of the airline by the Income Tax department

Suggestions

This business requires full time attention and it seems that Mallya being very busy in running his

diverse businesses is unable to focus his attention on the Kingfisher.

Thankyou