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1. Padmashree dr. d.y patil university Page 1
2. Submitted to:- prof. aprajita mam Page 2
3. GROUP MEMBERS NAME Anil kumawat- 012169 (Finance B)
Dhirendra Kumar Singh- 012215 (Finance C) Jai Singh- 012150
(Finance B) Neetu Rupnar- 012205 (Finance C) Prem Selvaraj- 012110
(Finance B) Sunny Jain- 012101 (Finance B) Ravi Jaiswal- 012111
(Finance B) Mohammad Haider- (Finance B) Kevin- Mohsin-
4. What factors caused kingfisher airlines to adopt liquidation
strategy? History Consequences of crisis Start of the crisis
Payment problems Tackling the crisis Liquidation of kingfisher
airlines CONTENTS Change in its market share conclusion Mistakes
kingfisher airline made Recent scenario Financial crisis Page
4
5. HISTORY Kingfisher Airlines Ltd. (KAIR) is a private airline
based in Bangalore, India. Owned by Vijay Mallya of United
Beverages Group . Kingfisher Airlines started its operations on May
9, 2005, with a fleet of 4 brand new Airbus A320. Page 5
6. Cont.. It started its international operations on 3
September 2008 by connecting Bangalore with London. Kingfisher
Airlines is one of the only seven airlines awarded 5-star rating by
skytrax. Kingfisher operates 400 daily flights with regional and
long-haul international services. In May 2009,KFA carried more than
1 million passengers, giving it the highest market share among
airlines in India. Page 6
7. Cont Until December 2011,KFA had the second largest share in
Indias domestic air travel market. First Indian Airlines to have in
flight entertainment systems on every seat with guest being able to
watch TV in flight. Page 7
8. START OF THE CRISIS Ever since the airline commenced
operations in 2005, the company is reporting the loss. Situation
became more horrible after acquiring the air deccan in 2007, the
company suffered a loss of over Rs.1000 crores for 3 executive
years. The start of the crisis was the freezing of the bank
accounts of the airline by the Income Tax Department. Page 8
9. Cont As on 10th Jan 2012, Kingfisher Airlines has service
tax arrears of 60 crore. KFA has not been depositing service tax
collected from passenger with the department since November 2011 on
regular basis and instead has been diverting it for other purpose
on regular basis. Page 9
10. TACKLING THE CRISIS DEBT RESTRUCTURING In November 2010,
the company adopted the way of debt restructuring and under that
total 18 leading lenders, those have landed total Rs. 8000 crores,
agreed to cut interest rates. Debt restructuring also could not
change the game. by restructuring, company had reduced the interest
charges by Rs. 500 cores every year, but due to the high leverage
condition and increase in cost, the company started to face the
liquidity problem. Page 10
11. Change in its market share until December 2011, kingfisher
airline had the second largest shares in Indias domestic air travel
market Now, due to a severe financial crisis faced by the airline
at the beginning of 2012, it has the lowest market share since
April 2012 Page 11
12. MISTAKES KINGFISHER AIRLINE MADE KFA was launched as a
premium business class airline, the market size for business class
tickets is small in India There was a lack of understanding of
customer requirements and basing a decision that luxury sells in
airlines Kingfisher airline borrowed heavily to fund loss making
airline Page 12
13. Cont Bought new aircraft when airline suffered from over
capacity Mallaya began the airline with a rush to buy planes. He
started with four-five planes but orders a lot more, and fast From
air-hostesses to food and in-flight entertainment, the cost per
passenger as a whole was double of what jet airways was offering
Page 13
14. RECENT SCENARIO The DGCA suspended its flying license on
October 20,2012. KFA has temporarily shut down its operations . Due
to financial problem it has reduced the fleet from 63 to 16. Tax
authorities in India, in may 2012, froze the companys accounts Page
14
15. In march 2012. the airline was suspended by the
international air Transport Association from using its
inter-airline fund clearing system. In June 2012 because cheques
issued by kingfisher had bounced. GVK India's secondlargest airport
operator launched legal proceedings against kingfisher airlines.
Page 15
16. FINANCIAL CRISIS The Kingfisher Airlines financial crisis
refers to a series of events that led to severe disruptions within
Kingfisher Airlines. Ever since the airline commenced operations in
2005, it has been reporting losses. Page 16
17. After acquiring Air Deccan, Kingfisher suffered a loss of
over 1,000 crore for three consecutive years. By early 2012, the
airline accumulated losses of over 7,000 crore. Page 17
18. CONSEQUENCE OF CRISIS Fuel dues Salaries delayed. Aircraft
lease rental dues Service tax Bank arrears Page 18
19. PAYMENT PROBLEMS Kingfisher Airline has staff strength of
6,000 and spends 58 crore on salaries a month. Airlines delayed
salaries of its employees in August 2011, and for four months in
succession from October 2011 to January 2012. Kingfisher also
defaulted on paying the Tax Deducted at Source from the employee
income to the tax department. Page 19
20. Cont In Jul 2011, Hindustan Petroleum Corporation Limited
(HPCL) stopped the fuel (ATF) supplies for about two hours to
Kingfisher airlines owing to the non-payment of dues. Bharat
Petroleum Corporation in 2009 had filed a case against Kingfisher
airlines for non-payment of dues(250 cr). Since 2008, it has been
reported that Kingfisher Airlines has been unable to pay the
aircraft lease rentals on time. Page 20
21. Cont As a result, Kingfisher had to return the A320
aircraft to GECAS. Kingfisher received a notice from the Airports
Authority of India on February 2012 regarding accumulated dues of
255.06 crore. Kingfisher Airlines had not paid some bankers
(Lenders) as per the Debt Recast Package (DRP) with lending banks.
Page 21
22. Cont By Feb 2012, Kingfisher has been declared NPA
(Non-performing asset) by following banks SBI Bank of Baroda PNB
IDBI Central bank BOI Corporation Bank Page 22
23. LIQUIDATION OF KINGFISHER AIRLINES Kingfisher Airlines seem
to have entered its last phase. Banks decided to sell the physical
assets of Vijay Mallya. After selling the shares of United Spirits
Ltd (USL) in the open market, banks have now decided to sell all
other assets of Mallya It includes villa in Goa, office at Mumbais
Andheri area, a luxury yacht, buses used by KFA to ferry travelers
at airports and other ground-handling equipment to recover their
dues Total value of collateral was Rs 6,500 crore against the dues
of Rs 7,000 crore to all banks, including the unapplied interest of
Rs 850 crore. Page 23
24. CONCLUSION Financial crisis of KFA was due to following
reasons: High fuel prices. Huge interest outgo due to heavy
investment in purchase of aircraft. Overspending/Expenses Page
24
25. Highly competitive industry Business model was not
effective. Recession-lose passenger(High operation cost due to low
demand) Page 25
26. Members part 5 to 7-anil 8 to 10-dhirendra 11 no
slide-mohsin 12 to 13-jai 14 to 15-neetu 16 to 17-ravi 18-kevin. 19
to 20prem 21 to 22-sunny 23 to 25- mohd. Hayder. Page 27