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  • 1. Kingfisher Airlines March 2010
  • 2. Table of Contents• Section 1: Kingfisher Airlines Overview• Section 2: India Aviation Market• Section 3: Recent Performance and Continued Initiatives 2
  • 3. Section 1Kingfisher Airlines Overview 3
  • 4. Kingfisher offers premium service with an efficient coststructure in the world’s most attractive aviation market Indian aviation market is on a recovery path and is poised for long-term accelerated growth − Recovery in the market is underway (14% load factor growth, 11% yield growth, 30% pax traffic growth) − Aviation is poised for secular growth of 15-20% (GDP growth at 8-9% Aviation growth 2x, 4 trips/100 people) 15 20% 8 9%, 2x − Irrational exuberance of capacity addition witnessed in the past is unlikely to recur (Air India likely to rationalize capacity by 30%, All other airlines expected to add only 10-15 planes in next year on base of 260) − Enabling conditions are improving; Significant upgradation in infrastructure of airports Indian market is unique; Transplanting global models in India has rarely worked − Indian geography makes airline travel indispensable; Emerging demographic profile requires equal focus on metro and Tier-2 cities; Higher growth likely inTier-2 cities which are typically located in 500-600km from key metros − After years of deprivation, Indian consumers are moving towards conspicuous consumption; deep-rooted class conscious mindset − Large proportion of consumers continue to be ‘indirect’ purchasers; leisure traffic is limited − No cost advantage for LCC operators (No separate airports, same personnel costs, low ancillary revenue, limited online booking) − Indian markets is more suited for short and medium-haul international routes at current fuel prices − Slot constraints in metro airports create entry barriers for new players 4
  • 5. Kingfisher offers premium service with an efficient cost structure in the world’s most attractive aviation marketKingfisher offers a unique model which serves all Indian consumer segments & positions KFA to capture allgrowth opportunities in India − Airbus and ATR fleet provides unique advantage to capture growth in metro, Tier-2 cities and international market − Premium offering covering all consumer segments (Only Indian airline with 5-star rating) − KF First for high end business & premium consumers (valet service, gourmet cuisine, stand-up bar & lounge) − Kingfisher Class for business consumers (IFE, superior service) − Kingfisher Red for value-conscious (Food on Board, Lounge access, FFP) − Cost - competitiveness to ensure premium services are offered at value price points − Cost difference with LCC would be limited to Food-on Board ($1.5) and GDS costs ($5)Kingfisher has developed unique advantage over its competitors − Best ‘lifestyle’ brand in the country supported by multiple UB group properties (e.g. Beer, Force India, IPL); 50 years of serving the Indian market provides unique consumer insights − Largest Indian domestic carrier by market share; widest domestic network connectivity (~ 400 daily flights) to leverage growth across all segments (Highest frequencies in key metros; Maximum day-return products; 29 exclusive city pairs; 400+ connections) l i it i ti ) (contd.) 5
  • 6. Kingfisher offers premium service with an efficient coststructure in the world’s most attractive aviation market(contd.) − First carrier to enter Big-3 alliances – One World; In addition, Kingfisher and Jet are the only private carriers currently to have approval for international operations y pp p − Medium-haul routes connect to hubs of major participants in the alliance (HKG, LHR, SIN); These routes also serve large Indian diaspora − All short-haul routes to neighboring countries served through cost-effective A320 which increase aircraft g g g utilization − Innovative FFP program has attracted over 1.1 million members in 4 years (68% cabin penetration in First)Kingfisher is India’s most efficient and flexible Airline − Consistently rated best on consumer satisfaction across surveys (rated higher than SQ in Asia) − Best on-time performance amongst scheduled carriers (82%+ in Jan ‘10) − Highest operational reliability of A321 fleet in world and one of the best technical despatch reliability in A320 fleet − High aircraft utilization (~12 hrs on Airbus in a non ‘red-eye’ market) − Low employee/aircraft ratio at 115; Non-unionized workforce; Outsourced model ensures low fixed costs − 25% of Airbus fleet is flexible; can be branded as Kingfisher Class OR Kingfisher Red based on market needs 6
  • 7. Kingfisher offers premium service with an efficient coststructure in the world’s most attractive aviation market Kingfisher is now focused on ensuring sustainable and profitable growth − Experienced management team is in place with deep aviation experience − Rationalized capacity by > 20% during past 2 years; At the same time order book position will ensure lucrative growth to capitalize on demand uptick − Steadily increasing Passenger RASK (21% increase from Rs 3.19 to Rs 3.86 over past 6 quarters); Several revenue enhancement initiatives identified and initiated, which would further enhance RASK − Kingfisher Xpress cargo service, One Stop Connect campaign, code share agreements with key global carriers, updated FFP program, Internet Booking Engine, Revenue Management initiatives, One World Alliance − Aggressive cost reduction plan targeted to reduce costs −Rationalizing distribution costs, Reduction in expat pilots, renegotiating E&M vendor agreements, renewal of operating leases at 20% discount, additional operational efficiencies (fuel consumption, overheads) − Balance sheet being restructured to re-phase and reduce debt − Appointment of Seabury as advisors to identify further opportunities for efficiency enhancement − Additional upside possible through policy initiatives like tax rationalization on fuel 7
  • 8. UB Group – Transparent Holding Structure (as on date) 51.8% Promoter Group UBHL Held by Held by Total Group UBHL Promoters Holding and Other Group Cos. Real Estate (UB City) Investments Pegasus License USL 29.11% 6.65% 35.76% UBL 12.62% 24.87% 37.49% KFA 60.58% 5.69% 66.27% Spirits Beer Aviation Other Inv UB 37.18% 3.56% 40.74% Engg gg 35.8% 12.6% 60.6% 10.2% MCF 24.51% 5.94% 30.45%United Spirits United Kingfisher Aventis Ltd Breweries Airlines Ltd Pharma Ltd Aventis 10.22% - 10.22% Ltd 100% 24.5% 50% Whyte & Mangalore Mackay Millennium Chemicals & Fertilizers Ltd Alcobev 37.2% UB Engineering Ltd 8
  • 9. UB Group’s Entry into Aviation May-05 Jan-05 31-May-07 • UB Group’s dominance of its core beverage KFA – first flight KFA buys 26% business, business gave it unique strengths Apr-05 stake in Air Deccan – Sharp understanding of the evolving tastes @ INR150/share and behavior of the Indian consumer Jul-05 – Ability to create premium products with true Oct-05 value – NNuanced understanding of operating i a d d t di f ti in Oct-08 21-Jul-08 highly regulated environment India’s largest Jan-08 Launches plans carrier with ~ for international 28% market Apr-08 operations and • Aviation offered extra ordinary growth share Kingfisher First potential in an emerging economy like India Jul-08 – UB group launched Kingfisher Airlines to leverage on its unique strengths Oct-08 • Aviation business has been built on threeJan-10 Apr-09 1-Sep-08 core competencies of the groupKingfisher dominates with Deccan to be renamed as – Ability to deliver a unique experience while Jul-09widest network coverage Kingfisher Red remaining competitiveof about 63 citiesoperating over 375 flights Oct-09 – Ability to manage scale upa day within India – Ability to tightly manage costs Jan-10 9
  • 10. Strong and Highly Experienced Management Team Chairman & CEO Dr. Vijay MallyaOperations & In-Flight & Finance Commercial ITEngineering Services A Raghunathan Manoj Chacko Sourav SinhaHitesh Patel Rajesh Verma CFO EVP CIOEVP EVP• Currently leading • Rajesh heads Guest • Mr. A Raghunathan is a • Manoj has over 18 years • Sourav currently heads operations and Services, In Flight qualified Chartered of experience in Indian and Information technology at engineering at Kingfisher Services, Airports and Accountant with over three international airlines and KFA and has over 17 Airlines, Hitesh has over Security functions at decades of work travel services. He years of work experience 27 years of work Kingfisher Airlines and has experience in finance and currently heads the with airline systems and experience in the Airline rich experience in the accounts. Before taking Commercial function at technology. Prior to joining industry. Prior to joining Airline and Hospitality over as the CFO of Kingfisher airlines and is Kingfisher, he spent 10 KFA, Hitesh managed the industries. Prior to KFA, he Kingfisher Airlines, Mr. A responsible for the Sales, years with TCS and was line and base maintenance worked with Jet Airways Raghunathan worked in Revenue Management, the head of IT department operations at JetBlue for over 10 years. Rajesh senior finance positions in Network Planning, at Qatar Airways Airways in United States y has also worked with the the liquor business of UB q y y Alliances and Loyalty as a Director for over 6 ITC-Welcome Group group for 26 years. He is functions. Prior to joining years. Hitesh enjoys the responsible for Finance, Kingfisher, he has worked record of having Accounts, Legal, with American Express maintained the best fleet Secretarial, Purchase & (Travel services division) with the highest dispatch Administration and Emirates reliability of Airbus A320s world-wide 10
  • 11. Strong and Highly Experienced Management Team (contd.) Chairman & CEO Dr. Vijay MallyaCorporate Human Resources Marketing Quality & Guest SecurityDevelopment & Rubi Arya Ravikant Sabnavis Commitment Maj. Leslie MissalPlanning VP VP Gaurav Rathore AVPAmit AgarwalA it A l AVPSr. VP• Amit has recently joined • Rubi heads the Human • Ravikant currently heads • Gaurav is responsible for • Major Leslie is the head of Kingfisher as Sr. VP – Resources function at the Marketing function at the Quality, Guest the Security function at Corporate Development Kingfisher Airlines. She Kingfisher Airlines and Commitment & Call Centre Kingfisher Airlines. Prior to and Planning. He comes has over 13 years of overall has an experience functions in Kingfisher Kingfisher Airlines, he was with a strong airline experience spanning of 18 years in Marketing. Airlines. Gaurav has over associated with the UB background spanning over various industries and He joined the UB group in 15 years experience in the group since 2003, in the 17 years with leading consulting. An MBA in 2007 and was Divisional aviation industry. Prior to role of Security Advisor. airlines such as American Human Resources from Vice President-Marketing joining Kingfisher, Gaurav Prior to his stint with the Airlines, Continental India’s premier institute prior to joining Kingfisher worked with Jet Airways UB Group, Major Leslie Airlines and Delta Airlines. XLRI, she was previously Airlines in September where he was heading the served the Indian Army for His last role with Delta was associated with the UB 2009. Service Quality Group. y p 10 years in counter- y Managing Director for RM, group. Prior to that, she insurgency areas, and as a Pricing & the Network worked with Black Cat Commando for 3 Group. PricewaterhouseCoopers years. in their Human Capital Solutions group . 11
  • 12. A Premier Product for the Indian Flyer with a Low CostFocusStrong Kingfisher Brand High brand salience & preference in the minds of Indian consumer Costs more aligned towards low cost model CNo Legacy Issues (Unions etc) Allow high level of operational flexibilityDiversified Network Well spread on business and leisure routesMonopoly Destinations Highest exclusive stations amongst private carriersHigh Service Quality Levels Premium business class product, well trained young staff Well positioned to capitalize on the demand uptick Segmented customer base targeted effectively through three sub brands “KingfisherBalanced & Flexible Aircraft First”, “Kingfisher Class” and “Kingfisher Red”Configuration Flexibility to deploy same aircrafts across Kingfisher Class and Kingfisher Red based on needOutsourced Ground Handling Protection against policy change More than 1 million members; superior features like faster tier upgrade, non-air rewardUnique Frequent Flyer Program shop, family club program encouraging customer stickiness 12
  • 13. Widely Recognized for Brand Strength and World ClassService Asia Pacific’s “Top Airline Brand” in a survey conducted by TNS on Asia Pacifics Top 1,000 Brands for 2008 (2007 – SQ) 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 conducted by India’s largest India s No. India s business magazine Rated the ‘Best Airline in Central Asia’ at the SKYTRAX World Airline Awards in 2009 Economic Travel award for ‘Indias top rated Domestic Airline- Full Service’ for Kingfisher Airlines and ‘Indias top rated Domestic Airline- Low Cost’ for Kingfisher Red (2009) ‘India’s favorite airline’ as per recent HT-MaRS consumer survey (2009) Kingfisher Airlines’ frequent flyer program, King Club received 2 Freddie Awards for Best Bonus Promotion and Best Customer Service in 2009 13
  • 14. “What Makes Kingfisher India’s Favorite Airline?”The Hindustan Times- MaRS Consumer Satisfaction Survey” rated Kingfisher as India’s Favorite Airline Overall Rating of Airlines Operators (1) Aggregating Their Flying Experiences on All Airlines, Indian Flyers Gave a Satisfaction Rating of 794 out of 1,000 “ Kingfisher’s valets (porters and loaders) make a great difference for guests. Kingfisher does a little extra, which Kingfisher 794 passengers like. It is also seen as a glamorous airline and people do like that, too. Then, of course, it serves excellent on- board cuisine” - Ajay Prakash, CEO of Mumbai-based Nomad j y , Jet Ai J t Airways 786 Travels Spice Jet 773 “The inquisitiveness about Mallya and his lifestyle draws a sizeable number of flyers to Kingfisher. Given an option, I prefer Indigo 761 Kingfisher. It is much better value for money” Ankur Bhatia, MD, Amadeus India, the country’s largest online reservation system Go Air 752 Jet Lite 745 “Kingfisher is the best due to its competitive fares and hygienic washrooms. Their service attitude makes all the difference. I will prefer Kingfisher even if the fare is 5 per cent more.” Air India 736 Rajesh Verma, Mumbai-based exporter 700 720 740 760 780 800 Notes (1) Higher scores indicate greater satisfaction levels 14
  • 15. Differentiated Strategy Offers Best-in-Class Value • Only low cost airline to provide • Only domestic airline to provide Complimentary complimentary meals includingGourmet Cuisine Gourmet menus created by a team of Hot & Filling On- breakfast, lunch, snacks and dinner renowned Chefs Flight Meals depending on flight timings • Our on-board reading material is a mix of International and Domestic, • Selection of Indian publications such Business, Fashion and Leisure as Cine Blitz, Times of India,In-Flight Magazines In-Flight Reading Economic Times and localReading Material • The newspaper selection ranges from Material newspapers as on board reading The International Herald Tribune and material The UK Times to ethnic language publications • Kingfisher First lounge on board isKingfisher • Only low cost airline in India to offer staffed by professionally trained Frequent FlierLounge in the g Frequent Flier Privileges Bartenders offering Signature PrivilegesAir • Reward system linked to King Club Cocktails in a luxurious setting • Kingfisher First Amenities (Perfumes, • A judicious mix of customer service Eau de Toilettes, Moisturisers, Lip and basic comforts provided at lowIn FlightIn-Flight Guest Efficient Service Balms and t il d Sl B l d tailored Sleeper S it ) Suits) costtAmenities at Low Cost exclusively designed by Salvatore • Delivers a delightful experience to the Ferragamo cost conscious yet discerning traveler 15
  • 16. Partnerships & Frequent Flyer Program • More than 88 bilateral and unilateral interline partners across the world • Focused on attaining code sharesPartnerships • Only Indian private carrier slated to join a global Alliance- One World, which is expected to further enhance revenue and streamline costs • Huge member base in just 4 years of launch (~1.16 million members growing at 46% YoY) • Awarded Two top honors at Freddie Awards 2008 (Best Bonus promotions , Best Customer Service)Frequent Flyer Program • One-of-its kind benefits like family club and non-air rewards • Very high cabin penetration levels indicating affinity to the product (Kingfisher First penetration ~68%) 68%) • Significant ancillary revenue generation through 57 partners across 10 verticals ( Banking, Hotel, Retail) • Launch of an auto-sweep co brand credit card (current and new partner) expected by Q2 FY11New Developments and • Launch of debit co-brand card expected by Q4FY11way forward • Extension of King Miles as a preferred loyalty currency by increasing width of partners • Increased CRM based analytics and campaigns 16
  • 17. One World Alliance About One World One World serves 800 airports in 150 countries. It World’s most profitable global alliance, bringing operates 9,000 daily flights, carrying 340 mn together the leading airline carriers American Airlines carriers- Airlines, passengers annually, on a combined fleet of 2,500 British Airways, Cathay Pacific, Qantas, Finnair aircraft Only alliance with member airlines based in every Voted the World’s Leading Airline Alliance for the continent and with members based in South America, seventh year running in the 2009 World Travel Awards Australia and Asia’s Middle East Key Benefits for Kingfisher Access to market share and network without significant addition of financial investments Access to landing/parking slots and gates that are typically leased to the larger airlines Significantly enhance customer proposition – Top-tier qualifying miles – Top-tier recognition – Global lounge access Provide further opportunities for cost savings and access to management best practices 17
  • 18. Powerful Marketing Efforts Drive the Kingfisher BrandStrengthMovie Associationsand in - FilmBrandingEvents Cabin Crew with Delhi CM Events: Women’s Conference Kingfisher Cabin Crew at Delhi Marathon with Cherie Blair at the TiE SummitOutdoor Branding 18
  • 19. Significant Marketing Synergies from Parent GroupBranding Leveraging Group Marketing Assets Formula 1 Car Racing Team Kingfisher East Bengal Football Club Royal Challengers IPL Cricket Team Kingfisher Frequent Flyer Program 19
  • 20. Extensive Network Providing the Widest Domestic Reach 66 aircraft Market Share Evolution 70 destinations % 394 flights a day 100 4 2 4 1 15 75 27 12 5 11 AI 18 50 7 36 18 JA 25 12 22 KFA 5 0 FY 2005-06 January 2010 KFA Air Deccan Jet Airways Jet Lite Air India Alliance Air Go Air Spice Jet Indigo Paramount Source: DGCA 20
  • 21. Performing well on operating parameters Key Operational Analysis KFA Current Fleet (Dec’09) 61 Average Fleet Age (yrs) 3.0 Employees per Aircraft 115* Market Share (Jan’10) 22.2% Average Seat Factor (Apr-Dec’09) 70.2% RASK (Apr-Dec’09) 3.58 CASK (Apr-Dec’09) 3.88 Unionized No Legacy Govt. Ownership No Customer Satisfaction Skytrax-5 starNotes(1) All metrics are for domestic operations only(2) Market Share is basis DGCA report for Jan ‘2010 2010(3) RASK is Passenger Revenue per ASK; CASK is EBITDA cost per ASK(4) ASKMs are basis the DCGA monthly reports(5) * Employees/AC numbers are for Domestic + International ops, based on Q3 FY10 declared numbersSource: DGCA and Published financials 21
  • 22. Uniquely Flexible Fleet to Aid Market Based DeploymentCurrent Fleet Description Projected Delivery Schedule Fleet Type # Aircraft Fleet Type # A320 # A330 # A350/380 Total Airbus 319 3 2011 - - - 0 Airbus 320 23 2012 6 4 - 10 Airbus 321 8 2013 9 3 - 12 Airbus 330 5 2014 7 4 2 13 ATR 72 25 2015 8 4 6 18 ATR 42 2 2016 12 0 2 14 Total 66 Total 42 15 10 67• Fleet Strategy – Airbus A 320 fleet in multiple configurations ( Single & Dual ) to aid a “map to market” capability – ATR fleet to leverage growing underserved & underdeveloped markets – Competitive A 330 aircraft designed with unique KF specs to create the “best product in the sky” for international best sky medium & long haul operations 22
  • 23. Leverage Strengths in Engineering & Maintenance • ISO certification- twice a year audit done by BSI Management system, India, a subsidiaryKey Industry Standard of British Standards InstituteCertifications • IOSA certification- 3 Audits (KF standalone, DN standalone, KF & DN combined)Fleet Management • Self management of entire NSOP fleet – B727 / HS125 / Helicopter EC 155Capabilities for • Total care support to Reliance ACJ (VVIP Aircraft)Specialized Purposes • First organization to receive approval under CAR 145High Operational • Highest operational reliability of A321 fleet in world fleet & one of the best technical g p yReliability and Safety dispatch reliability in A320 family fleetManagement • Safety management system is built into E & M policies through MOE & QMS • Approvals obtained from Civil Aviation Authority of Singapore (CAAS), Qatar Civil AviationForeign Regulatory g g y Authority (QCAA) Civil Aviation Authority of Srilanka (CAASL) (QCAA),Approvals • Approvals in process: General Civil Aviation Authority (GCAA-UAE), EASAThird Party HandlingSupport at IndianAirports 23
  • 24. Section 2India Aviation Market 24
  • 25. Most Attractive Aviation Market in the World …Aviation traffic in India Historical domestic passenger …Enabling conditions would amongst lowest in CAGR of 20%... ensure continued growth BRIC countries… Growth of Indian Aviation Industry Aviation Traffic Penetration in BRIC • Economy expected to Countries continue to grow at 7% – 9%50 050.0 CAGR of 20% since FY 2004 25 44.4 45.1 23 • Ministry of Civil Aviation envisages creating 39.440.0 35.8 20 infrastructure to handle 280 MM passengers by 202030.0 15 25.2 13 • Indian Middle Class to reach20.0 19.4 50% of India’s population at 15.7 10 600 MM by 202510.0 5 4 0.0 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10E Brazil China India Annual domestic pax traffic (Mn) No. of domestic passengers per 100 people KPMG expects India’s air traffic to grow 2 – 3 times by 2012 Source: KPMG, MOCA, CAPA, McKinsey Global Institute 25
  • 26. Highest Growth Aviation Market in the World CIS Europe 8.7% 7.9% 7 9% North America 10.5% Middle East 11.5% 11 5% 7.2% Africa Asia-Pacific 8.3% 7.4% India World 20-year 20-year 2007 2016 2017 2026 2007-2016 2017-2026 2007 2016 2017 2026 2007-2016 2017-2026 growth growth 9.7% 6.4% 8.0% 5.4% 4.4% 4.9%Source : Airbus Estimates 26
  • 27. Massive Infrastructure Investments Supports GrowthMassive Airport Investments Non-Metro Airports Identified for Upgrade and• Over next 5 years, Airports Authority of India Modernisation has planned an investment of US$3.1 BnGovernment policy support for Infrastructure Jammu• 100% FDI under automatic route is permissible Amritsar Chandigarh for green field airports Dehradun• Private developers allowed setting up of Jaipur Agra Lucknow Guwahati Dimapur captive airstrips and general airports 150 km. Udaipur Varanasi Patna Bhopal Agartala Imphal away from an existing airport Ahmadabad Indore Khajuraho Rajkot Ranchi Vadodara• 100% tax exemption for airport projects for a Nagpur Raipur period of 10 years Aurangabad Bhubaneswar Pune Vizag• The Government is also planning to develop around 300 unused airstrips Goa Mangalore Port Blair Coimbatore Agatti Trichy Madurai Trivandrum Land Constrained Airports Unconstrained Airports Source : CAPA 27
  • 28. Move Towards a Rational Supply EnvironmentAvg. Monthly Seats Offered Seats OfferedIndustry (MM) Industry (MM) H-o-H HoH∆6.5 2H 2008 4% 1H 2009 (16%) 6.1 6.0 2H 2009 3%6.060 5.9 5.8 5.6 5.5 5.55.5 5.4 5.3 5.2 5.2 5.4 54 3 5.3 5.3 5.3 5.2 5.1 4.9 4.95.0 5.1 5.0 5.0 4.84.545 4.64.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec CY08 CY09Source : MOCA Website, PIB press releases 28
  • 29. Government Policies Present Upside…• Expected change in Government policies & in macro-economic environment would result in lower operating costs for the industry − ‘Declared Goods’ status for ATF would result in lower uniform taxation of 4% on fuel − Escalation of airport costs at p p private airports expected to be charged as UDF from consumers. No p p g escalation foreseen for AAI airports, given the recent hikes in 2009 − Removal of expat pilots by July 2011 as per Government guidelines across Industry 29
  • 30. …And There Is Reason to be OptimisticThe big three players– Kingfisher Airlines (23%), Jet Airways + JetLite (25%) and Air India (18%) arecritical to the Indian economy (4) • $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 aviation (1) – Impact on indirect industry is estimated at 1 1 5 times size of aviation industry (2) 1-1.5 • Improved connectivity results in higher GDP growth – $100 spent on air transport produces benefits worth $325 for the economy (1) – Improves economic productivity of passengers (estimated at 50% of ticket prices) (3) • Creates significant employment potential – Direct ~ 100,000 – Indirect ~ 6 times (1) Notes 1) Naresh Chandra Committee Report 2) Port Authority report on New York aviation market 3) IATA report 4) YTD FY10 market share 30
  • 31. Indian Aviation – The Way Forward • The economy continues to show signs of recovery with GDP g y g y growth estimates climbing back g over 7%Favourable • Passenger traffic has firmed up in Q4 and is expected to grow by > 15% in the coming yearEconomic Outlook as per CAPA estimates • Premium traffic has also seen a comeback and growth is expected to continue • Industry capacity is more aligned to demand after a series of sharp cuts in the early 2009,Better Demand- and capacity induction in the current year is expected to be <10 % as per CAPA estimatesSupply Match pp y • Yi ld i Yield improvements witnessed i Q3 are expected to continue given the narrowing of the i d in d i i h i f hShould Improve demand supply gap. CAPA expects domestic yields to improve by 5-7% in 2010-11 and asYields high as 10% in Q3 of next year • Rational pricing is expected from industry, going forwardPricing and Policy • Government is re-evaluating policies which might benefit industry – ATF taxation, FDIMatters norms, RDB guidelines , g 31
  • 32. Section 3Recent Performance and Continued Initiatives 32
  • 33. Kingfisher Has Actively Rationalized and Restructured Capacity…KFA Capacity Trend Second round of capacity rationalization to balance demand supply First mover to rationalize industry capacity Shift of capacity towards KFR to address the tough market requirements• KFA decreased capacity by 25% in the domestic market in Summer 2008 to rationalize industry capacity• Capacity was further rationalized by 13% in June 2009 to balance demand and supply in a tough economic environment• KFR contribution to total capacity increased from 40% to 65% to address the market requirements 33
  • 34. …And Has a Well Calibrated Plan for its InternationalOperations…KFA adopted a cautious approach to international operations due to the prevailing economicconditions: – Did not initiate Ultra-long haul A340 operations - sold out the Aircrafts – C ti Cautiously d l l deployed th A330 t LHR SIN and HKG markets to build operations i t k d the A330s to LHR, d k t t b ild ti into key markets from India, along with potential alliances with other global carriers - a step towards joining a global alliance – Have identified lucrative short-haul markets - BKK DXB, CMB, KTM & DAC - and deployed short haul BKK, DXB CMB narrow body capacity of existing aircraft to enhance utilization – Future capacity deployment plans include increase of frequency to these destinations by further exploiting narrow body fleet – Currently KFA has an option to purchase 4 A 330s every year from 2012, the decision for which would be taken closer to date, given the operating environment 34
  • 35. …Which is Improving Operating PerformanceImprovement in Overall Seat Uptick in KFA’s Domestic Rising Yields as Seen inFactors of KFA Revenue (RASK-Fuel CASK) ( ) KFA’s Domestic ATV% RASK (in Rs.) KFA ATV Trend – ATV (INR)85 3.5 7,000 3.080 6,000 2.575 2.070 5,000 5 000 1.565 1.0 4,00060 0.555 0.0 3,000 c- 9 Fe -0 9 Ju -0 9 M 09 Apr- 09 Au l-09 Se - 09 O - 09 09 ay 9 Ju -09 No - 09 v n n Au l c g p M r ar b ct ay Ju De v-0 c- 9 M r- 0Fe -0 9 Ju 0 9M - 09Ap - 09 ApAu l-09Se - 09O - 09 09 ay 9Ju -09 NoNo - 09 Ju Ja Se De Fe b-De v-0M r- 0 O M n n g p ct n- a Ja n ar b g p ctJa 2008–09 2009–10 SF KFC KFR Total 35
  • 36. Improvement Reflected in Y-o-Y Results… Apr 09 - Dec 09 Apr 08 - Dec 08 (Rs. Cr) (Rs. Cr) Variance %INCOMEOperating Revenue 3,776 4,168 -9%Non Operating Revenues 43 16 +169%Total Revenues 3,819 4,184 -9%EXPENDITUREEmployee Remuneration & Benefits 531 620 -14%Aircraft Fuel Expenses 1,319 2,267 -42%Other Operating Expenses 1,484 1,739 -15%EBITDAR 485 (442)Aircraft Lease Rentals 840 900 -7%Total Operating Expenditure 4,175 5,526 -25%EBITDA (355) (1,342)Depreciation 156 125 +25%Interest 818 529 +55%Total Expenditure 5,149 6,180 -17%Loss before exceptional items and Tax 1,29 1,996 -33%Exceptional Item 300 (459)Provision for taxation (554) (482)PROFIT / (LOSS) AFTER TAXATION (1,075) (1,055) +2% 36
  • 37. With This Stringent Cost Focus, Kingfisher Has Emerged as the Lowest Cost FSC in the Current Year Cost Comparison (Apr-Dec FY10) KF Cost Details Rs. Cr Adjusted CASK (1) Fuel Cost 1,102 1.24 Non-Fuel Cost 1,920 2.08 Employee Emplo ee 472 0 48 (1) 0.48 S&D 408 0.46 Other 1,041 1.14 (1) EBITDAR Cost 3,021 3.32 Lease Cost 665 0.68 0 68 (1) EBITDA Costs 3,441 3.72 Depreciation/Amortization 156 EBIT Costs 3,598 3.88 ASKM (Mn) 8,860 8 860 9,760 9 760 (1) ASL 803 Seats/Flight 110NotesCosts include domestic operations, and include reversals undertaken in respective time periods(1) Adjusted CASK refers to estimated CASK at higher capacity for full fleet operations for Apr-Dec FY10 ( assuming no grounding of aircrafts) 37
  • 38. Kingfisher’s Multi Pronged Cost Reduction Initiatives AreExpected to Further Reduce its Costs Reduced Costs in 2010-11 • Focus on reviewing distribution channels and costs to reduce S&D costs to 8% of revenueRationalizingDistribution – New IBE geared towards increasing website salesChannels • Overall S&D cost and achieving a cost of < $4 per RPB, by restructuring CRS/GDS contracts and increasing direct web shareRenegotiating • Additional fuel discountsVendor Agreements • E&M costs with new vendor (Air France) • In-flight & Catering costs through change in menu and additional volume discounts • Renewal of operating leases at 20% discount to existing lease • Reduce Rentals, costs of Transportation and local Conveyance, CommunicationControlDiscretionary − Consolidate and optimize space (warehouses, offices, call centers)Spend − Increase effectiveness of spends and increase barters to reduce Marketing costs • Reductions in employee cost through sizing manpower with capacityHead Count • Replacement of high cost expat pilots in narrow body fleetRationalization • Reduction in excess AMEs/ ATR expat • Reduce fuel consumption to less than 3,000 Ltr/BH for A320 and 750 Ltr/BH for ATR operations through targeted reviews p , p g gOperational • Target E&M spend reduction (in-house C-checks, controlled redelivery)Efficiency 38
  • 39. Summary of Seabury’s Mandate and PlanFocus areas for Seabury include• Draft 5 year business plan basis current operating dynamics• Review all areas of operations• Review fuel consumption process• Implement leading practices in revenue management• Review and help restructure Sabre contracts• Review network strategy with focus on profitability• Benchmark aircraft lease rentals and maintenance reserves to the best• Evaluate profitability of ATR fleet 39
  • 40. Further Market Share Opportunities• Enhancement of day return product across key primary and secondary sectors• Incremental passenger connections generated through launch of ‘One Stop Connect’ campaign• Increased presence thro gh e pansion of inter line agreements and e al ation of global through expansion inter-line evaluation alliances• Increased ancillary revenues through launch of cargo operations (Kingfisher Xpress)• Strengthened loyalty through enhanced FFP program• New Internet booking engine driving greater consumer traffic towards online bookings• Leverage international POS to stimulate demand in key South East Asian markets 40