“Kingfisher Airlines update”

October 2008
Agenda
• UB Group: The growth story (slide 3)
• Airline Industry Overview (slide 9)
• Kingfisher Airlines Overview (slide 18)
• KFA Financials (slide 25)
• KFA Outlook (slide 31)

2
31st October 2008
 UB Group: Growth Story

3
UB Group’s growth story
SUCCESS MANTRAS
• India’s Leading branded consumer group
• Has dominated domestic market
− Accelerated organic growth
− Acquisitions
• Is Globally Competitive
• Has set standards of governance and transparency

4
31st October 2008
 No. 1 Beer in No. 1 Spirits in No. 1 Airline in
India India India What next?

Merged Hebert- Kept acquiring Brought in Scottish Acquired 100% Acquired further KFA merged in
sons into MCD smaller players in New Castle stake in Whyte 20% stake in DAL and the
beer and liquor and Mackay, Deccan Aviation merged entity
industry. through open offer renamed as
worlds 4th largest
Market gave Kingfisher
scotch company
thumbs up as Airlines
Margins doubled Limited
to 18% because of
synergies

UB2002
Group 2003 2005 2007 2007 2008
TIMELINE

Bought Gilbey BUILT BRANDS Acquired Acquired 26% in Announced merger Announced
Green lablel LIKE Shaw Wallace of KFA with
Deccan Aviation- Alliance with
KINGFISHER, Deccan,; Acquired Jet Airways
BAGPIPER,
& Co Ltd further 3% stake in
BLACK DOG … Deccan Aviation to
Consolidated Beer
increase the holding
business under
to about 50%
UBL and liquor
business under
USL

UB group has become the market leader in each core business it has ventured into
31st October 2008
United Spirits Limited
3 Years ago
• Multiple legal entities
• Primarily volume focus
• Growth driven by
market share across
segments
• “Spirits” player
• Focus on India
• Focus on annual
performance
• EBDITA 8.50%
6 *Source – Economic Times
• Strong EBITDA growth Now
• World’s No.3 distiller
• 17 Millionaire brands
• One legal entity
• McDowell No 1 family is the largest spirits brand
in the world with sales of 27.6 million cases( FY • Primarily top-line and
2008) profitability focus
• Growth driven by
• McDowell No1 family becomes the largest FMCG increased “premium-
brand in terms of retail sales value* ness” of the portfolio
• Mc Dowell No 1 Brandy – Worlds largest selling • Integrated player
brandy across spirits and
wines
• Bagpiper Whisky – largest selling in the world • Global ambitions –
pragmatically
• Pan-Indian presence - largest manufacturing/ calibrated
distribution set up
• Accountability for 3
• Leadership across flavors, geographies and price year strategic plan
points
• Export unit targeting Indian communities living • EBDITA 22%
abroad
31st October 2008
United Breweries Limited
• Sold in over 52 countries.

• UBL is the largest beer company in India with a market share in excess of
45%

• India’s first global consumer brand: Kingfisher

• Balanced portfolio of supporting brands

• Manufacturing network across all major states

• Established trade relationships

• Shares common distribution system with Spirits company

7
31st October 2008
Aviation

• Rated Asia Pacific’s most admired airline brand

• Voted India’s No. 1 airline in Customer Responsiveness in an independent

survey

• Voted India’s No. 1 airline in Customer Satisfaction in an independent

survey

• Recognized as one of India’s Most Respected Companies in 2006 and 2007

– Business World

• Voted India’s Favorite Airline. India’s only 5 star accredited airline

• International ops commenced September 2008

• Current Fleet size of 86 aircraft (50 Airbus NBs and 36 ATR’s). Market
Share of 27.5%. Network coverage of 64 cities operating over 400 flights a
day. Over 34 million guests flown since inception.

8
31st October 2008
 Indian Airline Industry
Overview

9
The economy looks up when we fly

• $14bn+aviation industry is similar in size to Indian Railways ($18bn)

• Creates substantial impact on other allied industries – Tourism, Hospitality, Banking

• 4.5% of global GDP is attributed to the air transport component of civil aviation1
• Impact on indirect industry is estimated at 1-1.5 times size of aviation industry2

• Improved connectivity results in higher GDP growth

• $100 spent on air transport produces benefits worth $325 for the economy1
• Improves economic productivity of passengers (estimated at 50% of ticket prices3)

• Creates significant employment potential

• Direct ~ 100,000
• Indirect ~ 6 times1

1. Naresh Chandra Committee Report

2. Port Authority report on New York aviation market
10 3. IATA report
31st October 2008
Huge Potential
Domestic Routes in 2000 Domestic Routes in 2007
SXR IX L SXR IX L

IX J IX J
IXD
PH M
ATQ ATQ KU U
SLV
IX C IX C

D EL D EL
D IB D IB
IX I
JA I T E ZJR H JA I T E ZJR H
JD H LKO IX B JD H LKO GOP IX B
GW L GAU DMU GW L GAU DMU
SH L
VNS PAT I X DV N S PAT
I X SI M F I X SI M F
UDR H JR UDR H JR
IX A A JL IX A A JL
BH J B IHX JY
AM D BHO IX R AM D BH O JL R IX R
J GR
AAJ ID R CCU JGR
AAJ ID R CCU
BD Q BD Q
PBD BHU PBD BH U
D IU N AG R PR D IU STV N AG RPR

IX U BBI IX U BBI
BOM BOM
PN Q PNQ

VTZ VTZ
H YD H YD
R JA
KLH
VGA
IX G
GOI GOI H BX
BEP

PUT
T IR T IR
IX E BLR M AA IX E BLR M AA

IX Z IX Z
C C JC J B AGX C C JC J B
TRZ TRZ
CO K CO K
IX M IX M

TRV T R VT C R

Source: OAG Schedules, Bombardier Aerospace, 2007

India’s air service connectivity has room to grow:

11
129 new routes connecting 22 cities were added from 2000 to 2007
31st October 2008
Indian Aviation Industry growth to exceed 25% CAGR

In the past few years, domestic Enabling the following macro economic conditions
industry has grown at CAGR of 31% would ensure continued growth:

• Economy is expected to continue to grow at 8-9%;

Annual domestic passenger traffic (mn)
Aviation business is directly impacted by same
60
• Adequate investments in infrastructure are being made
45
44 in key airports to enable them to handle 2-3 times the
35 current passenger loads by 2010
30 24 • USD 1.25 Bn. of investments in non-metro airport
18.5 development would drive growth in the market
15

Mar-05 Mar-06 Mar-07 Mar-08

KPMG report states that India’s air traffic will exceed the projected 25.4% CAGR for 2008
and expected to grow 2-3 times by 2012
12
31st October 2008
Airline industry: India vs. International
ƒ ATF prices are ~ 50% higher than international markets
(Estimated impact $ 1.5bn)

¾ Tax incidence ~ 50% on base price As a result airline companies are incurring heavy
losses while govt. and service providers are
¾ In contrast, the rest of the transportation industry has access to
significantly gaining at its expense
fuel at subsidized rates ~ 29% subsidy on petrol and 47% on
diesel
• Central & State Govt. – $1.5bn
ƒ Additional fuel consumption of ~10% due to airport congestion
(Excise duty, Custom Duty, Sales-tax, Entry tax)
(Estimated impact $0.5bn)

ƒ High airport handling charges • Fuel companies – $ 0.6bn+ (Margin on ATF)

¾ AAI is highly profitable (PBT margin of 40%; PBT at $ 400mn)

ƒ Route disbursal guidelines require airlines to fly in unattractive • AAI – $ 0.4bn

sectors (~ 300 flights in NE; estimated impact for KFA is USD 23
million p.a.)

Despite its economic significance, growing contribution to Indian economy and increasingly adverse fuel situation, the
industry has been subjected to significant disadvantages
13
31st October 2008
Consolidation to pave way for rationalization

Country No of Market share Industry Comparative Fuel Price

prominent of Top-2 Load metro fare (USD) (USD/ltr)
players* Factor
Australia 2 95% 80% 155 - 548 1.02
Japan 2 93% 65% 286 - 310 1.07
Brazil 3 92% 72% 238 - 440 1.00
UK/I 5 60% 73% 179 - 952 1.12
China 4 47% 75% 107 - 143 1.10

India 5 59% 65% 102 - 210 1.67

Industry consolidation would be driven through exit of fringe players and rational capacity addition linked to demand by
existing players in the near term. This would assist in driving-up load factors and realizations

th
14 * All fares for key metro sectors across countries equated to DEL-BOM distance (1167Km). Fares for Aug 18 from local airline websites; Fuel prices for Jun08
31st October 2008
Impact of the first round of consolidation

MDLR, 0.2%
Paramount, 1.7%
Indigo, 10.1%
Go, 1.8% UB Group, 27.5%
Spice, 7.9%

Indian / Air India,

18.1%
Implications
Jet Group, 32.6%
„
„ Industry
Industry loses
loses $500
$500 M
M As on Sep 2008

„
„
9 carriers
99 carriers reduce
carriers reduce to
to 333 players
reduce to players
players
„
„
Top
Top333 players
Top players control
control close
players control over
over
to
80%80% of the market
market
80% market

15
31st October 2008
Jet Airways & Kingfisher Airlines working together

Kingfisher Airlines and Jet Airways announced an agreement to form an alliance

of wide-ranging proportions that will help both carriers to significantly rationalize
and reduce costs by offering a unique high product quality with improved
standards of service to its consumers.

16
31st October 2008
 UB group has a history of successfully managing highly regulated,
capacity surplus industries and turnaround acquisitions

• Spirits business in India is characterized by • Achieved ~ 50% share of volumes in the segment United Spirits
− High fragmentation operates and 60% share of value
− Over capacity
− Market segmented by multiple price points • Latest EBITDA margin 22% (similar to major multinational
companies)

• Industry had single digit margins and falling price points

• Growth across all categories and across all geographies in India

• McDowell & Company Ltd, the flagship spirits company of the

UB group acquired a number of companies including its • Acquired 100% of Whyte & Mackay Ltd., the fourth largest
immediate competitor Shaw Wallace in 2005 scotch manufacturer in the world, based out of Glasgow,
Scotland

• Post this acquisition, UB has focused on realizing value both in

sales, and aggressive cost reduction • Today, United Spirits is the third largest distiller in the world,
behind Diageo and Pernod Ricard

Current Indian aviation industry scenario is similar to spirits industry 5 years ago
17
31st October 2008
 Kingfisher Airlines Overview

18
Unique high product quality with low cost
Best brands in the Airline Industry
• KFA is the 2nd ‘Buzziest Brand’ in the country
• Deccan voted the “Best Indian Budget Airline”*

Best product in the Skies

• Only airline in India with a 5 star rating (six in the world)
• KF Ranked highest in cabin comfort & on-board service

Highly satisfied & loyal customer base

• 99% of KFA guests recommend the airline
• DN loyalty index highest compared to other LCC’s

Leading Industry though innovation

• In-flight : Entertainment & gourmet cuisine
• Ground service : Personalized valet service
• Distribution : Mobile, home delivery, post office etc.
• DN leading LCC cabin innovations: In-flight reading
19
31st October 2008
 Differentiated Network Coverage

• The airline has the widest network in India, flying to all major business & leisure destinations in the country
covering > 95% of the addressable passenger base

• “Uniquely flexible” strategy to benefit from higher realizations on business routes and transition to low cost
if yield declines

Kingfisher Airlines Limited

• Business traveler/Premium traffic/SME traveler/Leisure traveler
• Full service/frequency/Low fare
• Focus on premium routes/low yield routes

20
31st October 2008
 KFA’s fleet plan has tremendous flexibility

• KFA fleet plan is based on A320 which remains a high value/high demand asset
− Group has current Airbus fleet size of 50 and net addition of 10 aircraft till Mar 2011
− There is a shortage of A320 in global markets; 166 orders of narrow bodies in the recently concluded air show
− This provides the flexibility to contract in short-term while maintaining longer-term growth potential
− No ATR additions in the current year

• KFA has been on the industry forefront to reduce deployed capacity

− Overall reduction of 21% flights
− 7 aircrafts rendered surplus as a result of the exercise

• Pro-active actions by KFA are influencing other airlines to rationalize capacity

− Spicejet, Indigo and Go have reduced capacity by more than 20%
− Jet has cut ~10% capacity; Jetlite has cut capacity by ~ 15%

21
31st October 2008
Proactive steps: Capacity addition
Approach to detailed Route wise Potential deployment opportunities
profitability assessment based on detailed route wise profitability

• Conducted detailed assessment of route traffic potential based • Potential route deployments planned for wide body aircraft
on data sources like IATA Pax-IS, MIDT • A 330
• Analyzed route wise competitive market share, product, − BLR – LHR
schedule
− BOM – LHR
• Defined class-wise projections on pure O&D traffic and feeder
markets − BOM – SIN

• Analyzed market ATVs from a point-of- sale perspective − BOM – HKG

• Assessed the impact of Kingfisher market entry on route • Wide body Fleet status
capacity − 5 A340s replaced by A330
• Defined detailed projections of all operational and fixed costs at − No further wide body aircraft induction for the next 2 year
multiple fuel price scenarios

22
31st October 2008
KF is leading the industry towards a structure where Vendors to Airline companies
make only a reasonable return

CURRENT RETURNS PROPOSED

Fuel companies & state Returns for fuel companies and tax revenues for Savings of Rs 9-10 / litre targeted through
governments govt.- Rs 18-20/ ltr sales tax and discounts of Rs 2/ ltr

Standard rate of Rs 125/ ticket from

Airline travel agents 4-5% of ATV from Airline company customers (50% reduction)

Rs 130/ booking 20% reduction

Distribution providers (GDS)
Rs 70 cr.
20% reduction
Catering companies - NIL -

Other opportunities: AAI operating profits at 40% Reduce current landing charges by 50%;
representation by industry supported by civil
Airport Authority of India Current profits ~ Rs 400 cr. p.a. aviation ministry

Above initiatives except AAI opportunity would lead to savings of over Rs 50-55 cr/ month

23
31st October 2008
Further reduction in non-fuel costs is being targeted

• Targeted cost synergies expected have accrued/on-track (Ground handling, Airports,

Maintenance, Pilots, Flight Operations, Insurance)

• Several other cost reduction measures initiated (reducing dependence on expat

engineers and pilots, hotel costs, discretionary training, uniforms etc.)

• Headcount per aircraft targeted to be reduced from 104 to 94 by leveraging synergies

Non –fuel costs targeted to be reduced by 7 - 10%

24
31st October 2008
 What is the impact on the
KFA Financials?

25
KFA Results: H1FY2009 Highlights

• The spiraling fuel costs have created an unprecedented and adverse impact on the operations

• The average fuel price in the six month period April to September 2008 has increased by close to 60%
and this increase resulted in an impact of INR 640 crores on the Company’s fuel bill. The average per
kiloliter price in this period (H1 FY09) was INR 61,400.

• The Company in order to overcome these increasing costs was constrained to pass on a part of the
costs to the traveling customer in form of higher fuel surcharges resulting in increased pricing to the
customer.

• The increase in fares coupled with the lean season (June to September) witnessed a drop in
passenger traffic and corresponding seat factor not just for the Company but also for the industry.
The period saw Kingfisher’s seat factor dropping in line with the industry by about 6%.

26
31st October 2008
KFA Results: H1FY2009 Highlights

In order to manage this challenging scenario, the Company has initiated various measures to manage
costs:

• Network alignment on merger and continuous review of poor performing flights, has resulted in
a reduction in capacity to the extent of around 4% during this 6 month period with further
reductions planned.

• The reduction of capacity was achieved more in the second quarter of this year i.e. July to
September 2008 where the reduction achieved was close to 15% as compared to Q2 FY08 i.e.
July to September 2007.

• As a result of this exercise, the Company has returned 2 aircraft and is in discussions to return
an additional 8 aircraft. The impact of these returns will be seen in H2 FY09.

• Deferred international roll-out plans apart from one flight operating between Bangalore and
London. Reduced deployment of wide-body aircraft in the near term.

27
31st October 2008
KFA Results: H1FY2009 Highlights

Reduction in fixed costs in the merged scenario

• Operating costs – Catering, Insurance, Engineering and Ground Handling –

reduced through re-negotiations with various service providers

• Employee Costs

¾ Reduction of expat employees in particular high cost engineers and pilots

¾ Higher attrition rate coupled with voluntary movement of employees in the

merged scenario (overall 650 employees). Improved cross utilization led to
no increase in manpower

28
31st October 2008
KFA Results: H1FY2009 Highlights

• Operating Revenues of INR 27,203 millions

¾ Up 33% over 6 months FY08 (H1FY08)

• Average Ticket Value per Passenger 4,936

¾ Up 55% over 6 months FY08

• Net Profit / (loss) after tax of INR (6,411) millions

¾ Losses reduced by 19% over 6 months FY08

• Achieved Seat Factor of 62%

¾ Down 6% (points) over 6 months FY08

29
31st October 2008
KFA Results: H1FY2009 Highlights

Company P&L Company Operating Parameters

H1FY09 H1FY09
In INR Millions April - Sep 2008 (6 Traffic Paramters April - Sep 2008 (6
months)
months)
Consolidated
Consolidated
INCOME ASKMs Mio 7,745
Income from Operations 27,203 RPKMs Mio 4,813
Other Income 421 Passenger Load Factor % 62%
Total Income 27,624
Total Guests Revenue Mio 27,172
Expenditure Revenue per Guest 4,936
Employee Remuneration & Benefits 4,262
Aircraft Fuel Expenses 17,100
Other Operating Expenses 12,143
Aircraft Lease Rentals 5,376
Depreciation 649
Interest Expense 2,460
Maintenenace Rent Reversed (5,262)
Total Expenditure 36,728

PROFIT / (LOSS) BEFORE TAX (9,104)

Provision for Taxation (2,693)

PROFIT / (LOSS) AFTER TAXATION (6,411)

30
31st October 2008
 KFA Outlook

31
KFA - Outlook
• The softening of the fuel prices has resulted in an improvement in the Company’s performance in
September 2008 (fuel prices reduced by 15.5%). Given the further drop in fuel prices, the Company
expects a better performance in H2 FY09.

• The recently announced alliance between Kingfisher Airlines and Jet Airways is expected to help both
carriers to significantly rationalize and reduce costs by offering a unique high product quality with
improved standards of service to its consumers.

• The two airlines will be able to derive maximum synergies by working together and thereby offer best
possible fares for the benefit of the end users i.e. the travelling customer.

32
31st October 2008
KFA - Outlook
The scope of this alliance is expected to include the following on the operational and cost aspect:
• Joint fuel management to reduce fuel expenses
• Common ground handling of the highest quality
• Common Global Distribution system platform
• Cross utilization of crew on similar aircraft types and commonality of training as also of the technical resources, subject
to DGCA approval

Areas covered on the revenues and revenue related operational aspects are :
• Code-shares on both domestic and international flights subject to DGCA approval
• Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82
International flights daily
• Joint Network rationalization and synergies
• Cross selling of flight inventories
• Reciprocity in Jet Privilege and King Club frequent flier programs

33
31st October 2008
In Summary…

• Further Consolidation would result in exit of • KFA is the cost player in the industry with
fringe players; rational capacity addition and best product offering
viable pricing

• KFA offers a flexible network strategy which

• Growth potential of aviation in the country is
expected to remain intact provides it a distinct competitive advantage

• Fuel prices are expected to stabilize to around • KFA has prepared a pro-active plan to
$70-90 /barrel in next 6-12 months overcome difficult fuel situation

Kingfisher Airlines would emerge a stronger airline in the next 6-12 months from the current situation

34
31st October 2008
Thank you