Kingfisher Airlines faced a severe financial crisis due to accumulated debts of over Rs. 15,000 crore from losses since its inception in 2005. It began delaying salary payments to employees in 2011 and eventually had its flying license suspended by the DGCA in October 2012 after freezing of bank accounts by the Income Tax Department. The crisis was caused by high fuel costs, interest payments on aircraft purchases, overspending, competition, an ineffective business model, and economic recession reducing passenger numbers. Foreign investment and cost-cutting measures were suggested to help resolve the issues.

1. KINGFISHER AIRLINES
FINANCIAL CRISIS
PRESENTED BY:
SOURAV GHORAI
KOSHYS INSTITUTE OF MANAGEMENT STUDIES
BANGALORE UNIVERSITY

2. CONTEXT
• History
• Current scenario
• Accumulated debt
• Consequence of crises
• Start of the crisis
• Payment problems
• Competitor analysis
• Swot analysis
• Conclusion
• Suggestion

3. HISTORY
• Kingfisher Airlines Ltd. (KAIR) is a private airline based in Bangalore,
India.
• Owned by Vijay Mallya of United Beverages Group .
• Tag line- “FLY THE GOOD TIME”.
• Kingfisher Airlines started its operations on May 9, 2005, with a fleet of 4
brand new Airbus - A320.
• It started its international operations on 3 September
2008 by connecting Bangalore with London.

4. • 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.
• Until December 2011,KFA had the second largest share in India’s
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.

5. CURRENT 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.

6. 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.
• 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.

7. CONSEQUENCE OF CRISES
• Its half of its fleet grounded.
• Salaries delayed.
• Several members of its staff going on strike.
• Kingfisher's position in top Indian airlines on the basis
of market share had slipped to last from 2 because of
the crisis.

8. START OF THE CRISIS
• The start of the crisis was the freezing of the bank
accounts of the airline by the Income Tax Department.
• 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.

9. ACCUMULATED DEBT
• KFA has a debt of Rs 8030 crore.
• KFA has been loosing money from day one and has
accumulated losses around RS 8000 crore.
• Cumulative due exceeds Rs 15000 crore.

10. 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.

11. • HPCL: 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.
• As a result, Kingfisher had to return the A320 aircraft to

12. • 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.
• By Feb 2012, Kingfisher has been declared NPA (Non-
performing asset) by following banks
• • SBI
• • Bank of Baroda

13. BALANCE SHEET
1569.9
5868.07
4734.62
6314.96
5823.91
1781.46
5822.374747.51
5289.34
7651.81
-188.14 -1608.83-1647.22
-1027.4
-2328.01
-4000
-2000
0
2000
4000
6000
8000
10000
FY 08 FY 09 FY 10 FT 11 FY 12
INCOME
EXPENDITURE
PROFIT
SOURCE: MONEYCONTROL

14. COMPETITOR ANALYSIS
ATTRIBUTES KINGFISHER JET AIRWAYS SPICE JET
Price 25% higher than
jet
Airways and
Indian
Lower than
Kingfisher airlines
Extremely low
Permission to fly
to US
NO YES NA
Permission to fly
to UK
YES YES NA
IPO Floated Floated Floated
Targeted
Customer
Both ends of
customer
Both ends of
customer
Lower end of
customers
Positioning Premium
Domestic
Segment
Premium
Domestic
Segment and
international
Segment
Lowest fares and
no
frills

15. COMPARISION WITH
COMPETITOR
INCOME(CR
)
EXPENSES(CR PROFIT(CR) TOTAL
ASSET(CR)
KINGFISHE
R
5823.91 7651.81 -2328.01 2947.61
JET
AIRWAYS
15477.39 13369.66 -1236.10 12048.61
SPICE JET 4019.11 4541.62 -605.77 708.20
CONTAINE
R CORP
4377.49 3037.22 877.88 5606.43
SOURCE:MONEYCONTROL

16. COMPARISION WITH
COMPETITOR
FACE VALUE(RS) LAST SHARE PRICE
IN NSE(RS)
MARKET
CAP(CR)
KINGFISHER 10 13.20 1067.51
JET AIRWAYS 10 350.65 3027.30
SPICE JET 10 34.40 1666.16
CONTAINER
CORP
10 1012.55 13161.41

17. SWOT ANALYSIS
STRENGTH:
• Strong brand value
• Support from parent company
• Add 1 million passenger created a year
Weakness
• Financial issue due to heavy Debt.
• Laying of employees caused a bad image.
• Unable to generate expected returns on investment done.
• Overspending of funds.

18. SWOT ANALYSIS
Opportunity:
• The Indian aviation industry is growing at a rate of 24%
per year.
• Large number of domestic untapped routes.
• Disposable income especially in middle class has
increases.
Threats
• Rising fuel cost.
• Govt. policies

19. 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
• Highly competitive industry
• Business model was not effective.
• Deregulation Act.
• Recession-lose passenger(High operation cost due to
low demand).

20. SUGGESTION
• Foreign Investment .
• Fuel efficient planes for shorter distance.
• Improve revenue per passenger.
• Avoid aggressive expansion of fleets.