KINGFISHER

DEBT CRISIS

CASE
The case provides information on the complex debt restructuring exercise at Kingfisher Airlines.

Despite restructuring the debt with the help of creditors, the airline found it difficult to extricate itself out of its troubles
In 2011 it hit financial turbulence in due to mounting debt and a shortfall in expected revenue.

INTRODUCTION
Kingfisher Airlines was established in 2003. It is owned by the United Breweries Group.

The airline started commercial operations on 9th May 2005 with a fleet of four new Airbus A320200s operating a flight from Mumbai to Delhi.
It started its international operations on 3 September 2008 by connecting Bengaluru with London. Kingfisher Airlines, through its parent company United Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red.

INTRODUCTION
It had a wide network with more than 375 flights across 63 domestic and 8 international destinations.

Kingfisher First business class.

Kingfisher Class economy class. It addressed its customers as guests and not just passengers It offered luxurious services to its guests in-flight.

INTRODUCTION
Kingfisher Airlines is one of the only seven airlines awarded 5-star rating by Skytrax .

Kingfisher also won the Skytrax award for India's best airline of the year 2011.
It had a domestic market share of 22 percent.

INDIAN AVIATION INDUSTRY

Tata Airlines in 1912 Indian National Airways in 1933 Air Services of India in 1937 Air India for international operations in 1953. Indian Airlines for the domestic sector in 1953. Ministry of Tourism and Civil Aviation permitted private sector airlines to operate as air taxis or non-scheduled services with several restrictions in 1986.

The Indian government adopted the open sky policy in 1990

INDIAN AVIATION INDUSTRY

Air Corporation Act of 1953 repealed in 1994. Private airlines were permitted to operate as scheduled operators in 1995. FDI investment by NRIs and PIOs was allowed to a limit of 49 percent.

Air Deccan in 2003 as LCC.

Kingfisher Airlines in 2005. The airline industry faced an intensely competitive phase which resulted in an overall loss of Rs.47,072.20 million in the FY 2007. In the FY 2010 the airline industry registered a loss of US $ 2.8 billion.

MERGER WITH AIR DECCAN

On 1st June 2007, the Board of Air Deccan approved the allotment of equity share of 26% to UB group & its nominees. The shares were allotted at Rs.155 per share approximately a 10% premium for the current market price (CMP).

UB group will make an open offer to acquire minimum 20% to all shareholders of Deccan aviation at a price of Rs.155.

MERGER WITH AIR DECCAN

The Kingfisher-Air Deccan group will be the largest domestic airline with a fleet of 71 aircraft including 41 Airbus aircraft and 30 ATR aircraft. This combined airline powerhouse will cover all segments of air travel from low fares to premium fares and offer the maximum number of 537 daily flights covering the single largest network in India connecting 69 cities Kingfisher will continue to serve the corporate and business travel segment while Air Deccan will focus on serving the low fare segment but with improved financial prospects for both carriers.

FINANCIAL CRISIS (REASONS)

Merger with Air Deccan.
Global Meltdown in 2008. Rising Oil Prices.

Higher taxes on aviation turbine fuel.

Discounts due to severe competition.

FINANCIAL CRISIS (EFFECTS)

Delayed Salary to employees.
Fuel Dues. AAI Reports.

Aircraft lease Rental dues.

Bank Arrears. Reduction in operations.

Income Tax Department.