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Page 1 Padmashree dr. d.y patil university

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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