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 (US$189 million) for three consecutive years. By early 2012, the airline accumulated losses of over 7,000 crore (US$1.32 billion) with half of its fleet grounded and 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. Start of the crisis Frequent changes

Started as a full-service carrier, Kingfisher Airlines then added a low-cost model, expanded it further, only to fold it up and go back to the initial focus of full service - all this in a period of just six years. 'Long term strategy and laser focus is indeed essential when it comes to running an airline business. Such frequent change in focus has not helped the airline, which has also been hit badly by external factors,' an industry analyst tracking Kingfisher Airlines said. 'Treated as a step-child' In a recent discussion with Business Standard, Captain GR Gopinath (Left, with Mallya at a press conference) who sold his low-cost airline Deccan Airline to Kingfisher Airlines, said that there was a disconnect between the two arms of the airline models. 'Low-cost aviation business was treated as a step-child. I was telling Mallya that it is now his child and there should be equal treatment. Post the merger, whenever there was an Air Deccan and Kingfisher flight at almost the same time-slots, a decision was taken to do away with the Air Deccan flight in the hope that the passengers will graduate to Kingfisher full-service. But just the opposite happened. They went to other LCCs,' says Gopinath, providing yet another example of Mallya's muddle-headed decision making.

The start of the crisis was the freezing of the bank accounts of the airline by the Income Tax Department.[1] Following are the year by year financial results of Kingfisher Airlines, all values are depicted in Indian rupee (INR) crore except EPS, which is in plain INR.[2] # 01 02 03 04 05 06 From To Months Total Income Cost Net Profit -68 -42 -11 EPS

Apr-05 Jun-06 15 Jul-06 Jun-07 12 Jul-07 Mar-08 09 Apr-08 Mar-09 12 Apr-09 Mar-10 12 Apr-10 Mar-11 12

1,352 1,689 -337 2,142 2,562 -420 1,546 1,734 -188

5,577 7,186 -1,609 -55 5,271 6,918 -1,647 -54 6,496 7,523 -1,027 -16

07 Total

Apr-11 Sep-11 06 78

3,410 4,142 -732 25,794 31,754 -5,960

n/a

Debt recast

In Nov 2010, Kingfisher Airlines has completed restructuring 8,000 crore (US$1.51 billion) debt, with all 18 lenders agreeing to cut interest rates and convert part of loans to equity.[3] Lenders have converted 650 crore (US$122.85 million) debt into preference shares which will be converted into equity when the airline lists on the Luxembourg Stock Exchange by selling global depositary receipts (GDR). Shares will be converted into ordinary equity at the price at which the GDRs are sold to investors. Besides the 1,400 crore (US$264.6 million) debt which will be converted into preference shares, another 800 crore (US$151.2 million) debt has been converted into redeemable shares for 12 years.[3] Airline's average interest rate is now down to 11%, helping the airline save 500 crore (US$94.5 million) crore every year on interest cost. Consortium of banks was represented by SBI Capital Markets. Kingfisher Airlines Ltd has informed BSE that the Board of Directors of the Company at its meeting held on November 25, 2010, has approved a Debt Recast Package (DRP) with lending banks, following a onetime relaxation in restructuring guidelines sanctioned by the Reserve Bank of India. The salient features of the DRP include: Conversion of debt of up to 1,355 crore (US$256.1 million) from lenders into share capital.[3] Conversion of debt of up to 648 crore (US$122.47 million) from promoters into share capital. Reschedulement of repayment of the balance debt to lenders over 9 years with a moratorium of 2 years. Reduction in interest rates. Sanction of additional fund and non-fund based facilities by the lenders. The recast plan involved the issuing of the following types of preference shares.[4] Share type Dividend Quantity Price 8% Recipient 575,000,000 10 (US$0.19) Consortium of

Redeemable Cumulative Preference Shares lenders Compulsorily Convertible Preference Shares lenders

7.5%

780,000,000

10 (US$0.19)

Consortium of

Compulsorily Convertible Preference Shares 7.5% Breweries (Holdings) Ltd, Kingfisher Finvest India Ltd Optionally Convertible Debentures 8%

648,000,000

10 (US$0.19)

United

20,000,000

100 (US$1.89) Star Investments Ltd.

Optionally Convertible Debentures Pvt. Ltd. Optionally Convertible Debentures Ltd.

8%

30,000,000

100 (US$1.89) Margosa Consultancy

8%

30,000,000

100 (US$1.89) Redect Consultancy Pvt.

In addition to these issues, 9,700,000 units of 6% Redeemable Preference Shares of 100 (US$1.89) each issued to United Breweries (Holdings) Ltd. (Promoter Company) were converted to 97,000,000 units of 6% Compulsorily Convertible Preference Shares of 10 (US$0.19) each. Kingfisher Airlines, in Nov 2011 was attempting for a second debt recast. However second debt recast has been ruled out by Government of India. Minister of state for Finance made a statement on 09th Dec 2011.[5] [edit]Recast pledge Kingfisher Airlines has pledged its brand as collateral with its lender consortium for 4,100 crore (US$774.9 million). The brand valuation was done by Grant Thorton in 2010.[5] Reportedly the Brand has been valued and loan raised worth triple the carriers market value.[6] On July 6, 2011, pursuant to requirements prescribed under the Debt Recast Package Kingfisher Airlines' founder companies, United Breweries (Holdings) Ltd and Kingfisher Finvest Ltd, have pledged their entire stake in the airline with certain of its lenders.[7] United Breweries Holdings Ltd held 199,598,555 shares (representing 40.1% of total outstanding shares) in the airline and has pledged all the shares to lenders. At the same time, Kingfisher Finvest Ltd held 63,478,570 shares (representing 12.75% of total outstanding shares) has pledged its entire holding to the lenders.[8] [edit]Payment problems

[edit]Delayed salary Kingfisher Airline has staff strength of 6,000 and spends 58 crore (US$10.96 million) on salaries a month. According to the first quarter financial results, it has 173.66 crore (US$32.82 million) under the employees cost head, which has increased from 163.41 crore (US$30.88 million) during the same quarter last year. Kingfisher Airlines delayed salaries of its employees in August 2011,[9] and for four months in succession from October 2011 to January 2012 [10][11][12] In a report to DGCA on 09th Jan 12, Kingfisher had stated that it has paid past (salary) dues to 60% of its employees and that by 31st Jan 12, payment of December 2011 salary for all its employees will be done.[13] Protesting at the delays in payment,Kingfisher pilots started making in-flight announcements citing "It is their sense of duty towards the guest that is making them fly despite not being paid salaries for the past two months".[14] Kingfisher also defaulted on paying the Tax Deducted at Source from the employee income to the tax department.[15]

[edit]Fuel Dues 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. Situation was later resolved by Vijay Mallya meeting the CBDT Chairman to unfreeze some A/C's.[16] In the past several years, Kingfisher airlines has had trouble paying their fuel bills. BPCL: Bharat Petroleum Corporation in 2009 had filed a case against Kingfisher airlines for non-payment of dues. High court in an order said that the entire amount (245 crore (US$46.31 million)) had to be paid by Nov 2010 and the airline paid it in instalments.[17] [edit]Aircraft lease rental dues Since 2008, it has been reported that Kingfisher Airlines has been unable to pay the aircraft lease rentals on time. GECAS: In Nov 2008, GE Commercial Aviation Services threatened to repossess 04 leased planes in lieu of default. Kingfisher Airlines initially denied that it missed the payments.[18][19] GECAS had filed a complaint with DGCA saying Kingfisher had defaulted on rentals for four Airbus A320 aircraft, and sought repossession of the planes.[20] In Jan 2009, The Karnataka High Court rejected petition by Kingfisher Airlines to restrain GECAS from taking any step to deregister and repossess the 04 aircraft in dispute. As a result, Kingfisher had to return the A320 aircraft to GECAS.[21] DVB: In Jul 2010, DVB Aviation Finance Asia Ltd (a lessor from Singapore), sued Kingfisher Airlines for lease rental default. Case was filed in a UK court on Jul 16, 2010 after Kingfisher did not pay for three month lease rental for A320 aircraft it leased from DVB.[22] Kingfisher Airlines has grounded 15 out of 66 aircraft in its fleet as it was unable to meet the maintenance and overhaul expenses.[23] [edit]AAI reports Kingfisher received a notice from the Airports Authority of India on February 2012 regarding accumulated dues of 255.06 crore (US$48.21 million). The airline was operating on a cash and carry basis for the last six months, with daily payments amounting to 0.8 crore (US$151,200) [24] [edit]Income tax On 9 December 2011, MC Joshi,Chairman CBDT announced that ITis considering legal action against Kingfisher for not paying tax and may go for prosecution.[5] As on 10th Jan 2012, Kingfisher Airlines has service tax arrears of 60 crore (US$11.34 million). The Ministry of Finance has given a concession to Kingfisher and instructed them to pay the dues by 31st Mar 2012. In Jan 2012, Kingfisher paid 20 crore (US$3.78 million) towards its dues for December 2011 and part of the arrears.[25] [edit]Bank arrears

Kingfisher Airlines had not paid some bankers (Lenders) as per the Debt Recast Package (DRP) with lending banks. Till the end of Dec 2011, the arrears were estimated to be 260 crore (US$49.14 million) to 280 crore (US$52.92 million). Lenders hence had told Kingfisher Airlines to clear its dues before they can release any more money sought by the Airline. Ravi Nedungadi, chief financial officer of UB Group however said that the arrears were 180 crore (US$34.02 million).[26] If arrears were not paid in time (Dec 2011); Kingfisher Airlines would automatically have been treated as NPA, (Non-performing asset).[27] On the last working day of the third quarter of financial year 2011-2012, Kingfisher Airlines made one month interest amount to the banks; thus saving the account from turning a non-performing asset[28] State Bank of India (SBI) on 5th Jan 2012 declared Kingfisher Airlines a NPA (Non-performing asset). SBI is largest creditor and the leader of the consortium of banks in the DRP (Debt Recast Package) and has an exposure of 1,457.78 crore (US$275.52 million).[29] By Feb 2012, Kingfisher has been decleared NPA by following banks;[30][31] SBI Bank of Baroda PNB IDBI Central bank BOI Corporation Bank In December 2011, for the second time in two months, Kingfisher's bank accounts were frozen by the Mumbai Income Tax department for non-payment of dues. Kingfisher Airlines owes 70 crore (US$13.23 million) to the service tax department.[32] Indian tax body also stated that Kingfisher Airlines is delinquent[33] As response, Dr. Vijay Mallya called on the Chairman CBDT and offered to pay up the dues by 13 Dec 11[34] Kingfisher bank accounts were unfrozen on 14th Dec 11.[35] Due non-payment, several Kingfisher's vendors had filed winding up petition with the High Court. As on Nov 2011, winding up petition of seven creditors was pending before the Bangalore High Court.[36] In the past Lufthansa Technik& Bharat Petroleum Corporation Limited (BPCL) had also filed winding up petition against Kingfisher Airlines[37] [edit]Other problems

[edit]Erosion of net worth

In Sep 2011, the Chairman & Managing Director of Kingfisher Airlines made following disclosure to BSE; The Company has incurred substantial losses and its net worth has been eroded. However, having regard to improvement in the economic sentiment, rationalization measures adopted by the Company, fleet recovery and the implementation of the debt recast package with the lenders and promoters including conversion of debt into share capital, these interim financial statements have been prepared on the basis that the Company is a going concern and that no adjustments are required to the carrying value of assets and liabilities"[38]

This filing was widely covered by Indian and international print and electronic media and analysts. It was stated by analysts and media that the company needs capital infusion to remain viable and this has pushed shares to near historic lows.[39] Kingfisher Airlines Lenders later stated that they consider that company is viable.[40] On 15 November 2011 the airline released poor financial results, indicating that it was "drowning in high-interest debt and losing money". Mallya indicated that his solution was for the government to reduce fuel and other taxes. The government was engaged in assessing whether to bail out the company and other airlines or let market forces determine which ones survive.[41] [edit]Oneworld alliance On 7 June 2010 Kingfisher became a member elect of the Oneworld airline alliance when it signed a formal membership agreement. Kingfisher confirmed on the 20th December 2011 that it will join the Oneworld airline alliance on February 10, 2012. Kingfisher would have been the first Indian carrier to join one of the big airline alliances.[42] However on February 3, 2012, owing to bad financial situation and two days after IATA clearing house suspended Kingfisher airlines; the airlines participation to Oneworld has been put on hold.[43] Recent reports indicate that Oneworld is cofirming Kingfisher's ouster from the alliance in the coming few days. [edit]2012 crisis

[edit]Fleet grounding

Vijay Mallya, the Chairman of Kingfisher and UB During late February, 2012, Kingfisher Airlines started to sink into a fresh crisis. Several flights were cancelled and aircraft were grounded. The cash-strapped airline claimed that the disruptions will continue for four days due to unexpected events including bird strikes which rendered aircraft out of service. The airline shut down most international short-haul operations and also temporarily closed bookings. Out of the 64 aircraft, only 22 were known to be operational by February 20. With this,

Kingfisher's market share clearly dropped to 11.3%.[44] The cancellation of the flights was accompanied by a 13.5% drop in the stocks of the company on 20 February 2012. The CEO of the airlines, Sanjay Agarwal was summoned by the Directorate General of Civil Aviation to explain the disruptions of the operations.[45] The State Bank of India, which is the lead lender to Kingfisher airlines said that they would not consider giving any more loans to Kingfisher unless and until it comes up with a new equity by itself. Political activists also claimed that bailing or helping a private airline would lead to problems within the Government. By February 27, Kingfisher operated only above 150 out of its 400 flights and only 28 aircraft were functional. Reuters reported that if Kingfisher were to shutdown, it would be the biggest failure in the History of Indian Aviation.[46] It was announced that the direct flights to the smaller airports of Jaipur, Thiruvananthapuram, Nagpur and also to Hyderabad's Rajiv Gandhi International Airport were all shut down and only one/two-stop flights from its main hubs of Delhi and Mumbai would operate.[47] In response to a situation as bad as bankruptcy, Vijay Mallya announced that he had organized funds to pay all the employees' overdue salaries. With bank accounts frozen and huge debts due, it is unknown so as from where he arranged the money. But he apologized to his workers and said that he would pay them immediately. By this time, kingfisher had accumulated losses of 444 crore (US$83.92 million) during the third quarter of the fiscal year 2011-12.[48] Reuters then reported that Etihad Airways was interested in investing in Kingfisher by providing equity in exchange for a stake in the airline. Also involved in the talks was the International Airlines Group, owner of British flag carrier British Airways and Spanish flag carrier Iberia.[49] [edit]Frozen bank accounts On March 3, 2012, The CBDT of India froze many more Kingfisher accounts as it was unable to pay all the dues as per schedule. Kingfisher was meant to pay 1 crore (US$189,000) per working day. It reportedly missed the deadline set by the board and could not pay the dues until the evening on February 29. This led to more accounts being frozen. The airline neither did comment on the situation, nor pay the taxes.[50] Aviation minister Ajit Singh warned the airline about the temporary suspension of the license until the crisis was sorted out. He announced that the rest of the airline's fleet would be grounded and all flights cancelled until the crisis came to an end. This would be only one step from permanently closing the airline.[51] [edit]IATA suspension On March 7, 2012 IATA suspended ticket sales of Kingfisher airlines citing non-payment of dues as the primary reason, and they said that sales services will only be restored once Kingfisher settles ICH (IATA Clearing House) account.[52] IATA also immediately directed all travel agents to stop booking tickets for Kingfisher. According to preliminary reports, this would affect Kingfisher's business by around 30%. Kingfisher claimed that frozen bank accounts was the main cause of being unable to pay the IATA, and the airline started making alternate arrangements for the sale of tickets.[53] Soon it became difficult for the airline to follow the much smaller schedule that it earlier released as even more pilots began to go on strike. A pilot later claimed that from March 12, about 80% of the pilots would not fly as they

mentioned in their letter to Vijay Mallya. The airline's plans on restating all services by April 4 did not seem too real at the moment.[54] [55]===Arrest Warrant against Chairman Mr. Vijay Mallya=== On October 12, 2012 a court in Hyderabad issued a non bailable warrant against Kingfisher Airlines and its chairman Vijay Mallya in a case of cheques bouncing filed by GMR Hyderabad International Airport Ltd (GHIAL). The case pertains to bouncing of cheques worth Rs 10 crore issued by Kingfisher Airlines to GMR as Hyderabad airport charges. GMR Hyderabad International Airport Ltd, which manages the Rajiv Gandhi International Airport, had earlier moved the Nampally criminal court in Hyderabad and filed a case against Kingfisher for dishonouring four cheques worth Rs 10.5 crore.[citation needed]

A tale of two airlines: Kingfisher vsIndiGo What makes one company succeed, while another, in the same operating environment, falter? Sometimes, luck plays a role but in most cases in business history, the difference between survival and extinction is more about discipline versus excess, adaptation versus rigidity. Just look at the divergent stories of Kodak and Fujifilmboth legendary firms in the film business. While Fuji realised its days were numbered and managed to reinvent itself by launching newyet unrelatedbusiness lines in things like cosmetics and optical films for LCD flat-panel screens, Kodak is a shadow of its former self because it couldnt articulate a strategy beyond images.

In India, a similar tale of contrasting approachesand fortunescan be seen in the airline industry. While Kingfisher airlines cannot be relegated to the dustheap of airline history as yet, its abysmal performance in the last few years makes it stand out in stark contrast to IndiGoIndias most profitable airline. Why did one soar and the other plummet?

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News Now Frozen bank accounts led to disruptions: Kingfisher Not helping any one airline, the whole sector is in crisis: Ajit Singh DGCA summons Kingfisher officials, govt says no bailout Banks come to Kingfisher's rescue Blessing in disguise for aviation industry Kingfisher flies into more crisis

Mallyas many models While both airlines declined to comment for this story, an analysis of the operating history of both Kingfisher and IndiGo sheds some light on that question. One answer has to do with Kingfishers schizophrenic approach to a business model. Kingfisher was launched as an all-economy, single-class configuration aircraft with food and entertainment systems. After about a year of operations, the airline suddenly shifted its focus to luxury. It changed the configuration of its Airbus 320 aircraft (around 14 of them in the fleet back then) to 20 business class and 114 economy class seats from 180 all-economy seats. Kingfisher made too many changes in their business model and strategies and that led to strategic weakness, said KapilKaul, Chief Executive Officer (South Asia) for Centre for Asia Pacific and Aviation, an airline consultancy firm. This had a major impact on the airline. When an airline keeps changing its model and takes to random expansion, there is no time for the airline to stabilise, said an industry insider, on condition of anonymity.

On the other hand, IndiGo preferred to wait and have a solid business plan in place. Its plan was to stick to operating a single configuration aircraft, providing point-to-point connectivity. The airline launched with one aircraft and had a plan to add an aircraft every six weeks, giving them enough time to stabilise. Furthermore, the plan also meant sticking to its low-frills airline identity where meals and drinks were sold on-board and not given away for free.

After Kingfishers plunge into luxury came its next follya merger with Air Deccan, an airline formed by Captain G R Gopinath in 2003. The all-economy configuration of Air Deccan was rebranded and called Kingfisher Red, which continued to operate as its low-cost wing till recently. Kingfisher ended up spending Rs 550 crore on an airline that had losses of over Rs 550 crore.

It is widely believed that Kingfisher merged itself with Air Deccan so that it could classify as an airline with five years of domestic flying in 2008, thus fulfiling requirements to fly international routes. The fact that Jet had meanwhile swallowed Air Sahara didnt help, fuelling a competitive race to be the biggest airline around. Global developments at the time simply exposed the soft underbelly of the airline. Whenever Kingfisher made an important and strategic move (to acquire Deccan and then the financial restructuring with banks converting part of debt into equity, for instance), the overall market conditions changed, said KapilKaul. Essentially, jet fuel prices began to sky-rocket and soon touched $150. Then came the 2008 recession that made fundamentals in the airline industry worse, which is when the airline launched its international operations.

It didnt help that Kingfisher was very aggressive with its international expansion, launching long-haul as well as short-haul flights. Kingfisher wanted a lot of rights in one go. We also advised them to be gradual but they were hell bent on aggressive expansion, said a senior civil aviation ministry official, on condition of anonymity. IndiGo, however, continued its gradual expansion and waited for five years to launch its international operations, although, arguably, the airline had to wait those five years because of airline industry regulations. Still, it wasnt tempted to find loopholes to expand aggressively in what was a rapidly growing market.

IndiGos measured take-off An experienced and professional team in the cockpit is a basic requirement for any airline to be able to withstand stormy skies. Yet, things went out of control further because Kingfisher never had a professional airline management in place, said Chennai-based aviation analyst Mohan Ranganathan, who is part of various government committees on aviation. Kingfisher Airlines Nigel Harwood was appointed when the airline was launched in May 2005, but left after over a year. The airline never had another CEO till September 2010 with Mallya insisting on running the airline until finally relinquishing control by appointing Sanjay Aggarwal as CEO.

IndiGos approach was more measured and professional. Its first CEO, Bruce Ashby, was in India 18 months before the launch, and an experienced team at the management/board level has been key reason of IndiGo's success, said Kaul, adding that the biggest reason for the airlines success is its sharp focus on key deliverables like on-time performance, low fares, consistent onboard and ground service.

This slow and steady approach has made IndiGo the second-largest airline in terms of passenger carriage in a matter of over five years (it commenced operations in August 2006) with a fleet of 50 aircraft. IndiGo is behind domestic market leader Jet Airways, in business since 1993 and operating a fleet of 100

aircraft. Kingfisher Airlines, with a fleet of 40 aircraft (20 more are grounded), is the fourth- largest in terms of passenger carriage, below Air India which ranks third.

A STUDY IN CONTRASTS How Vijay Mallyas Kingfisher stacks up against Rahul Bhatias IndiGo IndiGo Kingfisher Business Model Strictly followed a low-cost, single class as well as aircraft model Started with single-class model, shifted focus to premium class and is once again changing to a mix of less premium and more economy Expansion Focussed on inorganic expansion by adding a plane every six weeks Air Deccan in order to expand aggressively in both international and domestic sectors Merged with

Operations Second largest carrier by passenger carriage with 50 aircraft Slipped to being the fifth-largest carrier in terms of passenger carriage, grounded over 20 aircraft and now operates with less than 40 planes Management Bruce Ashby, first CEO, was in place 18 months before the launch CEOs since its launch and Mallya insisted on running the airline most of the time Had only two

Current Standing In international expansion mode and is solidly profitable, booking Rs 650 crore in 2010-11 from Rs 551 crore in 2009-10 Is in deep financial trouble and is cutting back operations with accumulated losses of around Rs 6,000 crore and debt on its books of over Rs 7,000 crore Another difference between IndiGo and Kingfisher is in the formers ability to strike savvy deals especially for its aircraft. The 100 Airbus aircraft deal signed in 2005 was a game changer as they managed to get an exceptional price and gave them the strategic ability to leverage it significantly, Kaul adds. The deal was to buy 100 Airbus 320 aircraft and every aircraft would be returned after six years. The airline has already received 50 aircraft and the rest is to join the fleet till 2015. However, the real upside in IndiGos deal was a clause that ensured that Airbus would be responsible for anything going wrong with aircraft parts in subsequent years. For instance, when a problem was reported in the silver screw in the Airbus 320 engines in both IndiGos and Kingfishers aircraft, Kingfisher had to ground some aircraft while IndiGos problem was immediately taken care of by the manufacturer.

Predictably, the Gurgaon-based carrier which launched in 2006 is the most profitable airline in the country. In the last financial year, the airlines profits rose from Rs 551 crore to Rs 650 crore, the third straight year that the airline was in the black.

Kingfisher Airlines on the other hand is awash in a sea of red. It recorded a loss of Rs 1,027.40 crore in 2010-11 and has losses of Rs 1,175 crore for the first three quarters of the current fiscal already, with accumulated losses of around Rs 6,000 crore. Its debt burden is now over Rs 7,000 crore and it recently reported a reduction in major sectors. Its financials are so bad that Oneworld Alliance which operates over 9,300 daily flights, carrying 335 million passengers on a combined fleet of over 2,400 aircraft globally has declined to admit Kingfisher into the alliance.

Some companies just fail to learneither from the examples that its peers may have set for the industry, or from its own past mistakes. Now, Kingfisher has decided to change its model yet again discontinuing its Kingfisher Red brand and completely converting its fleet to a dual class, full-service configuration.

This, industry observers feel, will reduce the chances of a revival since 75 per cent of domestic capacity is in the low-cost sector and international low-cost carriers are launching flights in the short-haul international sector as well, namely in West Asia and Southeast Asia.

Thats not good news for an airline thats struggling to survive.

3 Way Approach to Kingfisher Airlines ( Possible solutions for KFA's existing issues:

1. KFA can look out for some joint ventures (like the way Spice Jet had investments from Sun Group Leading media in south) from a different business where in they're ready to take some 10 to 15% stake in KFA.

2. Efficient use of Human resource - Can employ support staffs on need for the hour basis (paid on numbers of hours worked) and not on monthly salary. They can be contract workers and not employees of KFA so that when number flights per day is more then we can use more support staff, and less during non traffic.

3. Keep the Brand Legacy - People always lookedup to KFA for better experience, try to continue by increasing the no. of flights to metros and other towns where the business class passengers are more, once they come out of fund flow issue, they can look out for expanding to more new destinations. Corporate Affairs Minister M VeerappaMoily indicated on Saturday that the cash-strapped Kingfisher Airlines was "not professionally managed" and the onus was on promoter Vijay Mallya to convince the lenders.

Asked if mismanagement was responsible for Kingfisher's troubled times and that the carrier should be allowed to fly into the sunset, Moily said on the sidelines of a function: "that's not our (Government's) desire; it (Kingfisher) has to survive".

"But the only question is, you know, he (Mallya) has to take some proactive interest; he has to manage it well", he said.

"The whole difficulty with some of our airlines is that they are not professionally managed, which include Indian Airlines and Air India. I think we need to work on these things", Moily, a former Karnataka Chief Minister, said.

Noting that IndiGo was making profits, he said other airlines have to learn a lesson from that carrier and "take it forward".

Moily said Mallya also met him and he suggested "somethings" to the Kingfisher Airlines Chairman. "He (Mallya) has to give a possible solution to bankers (the lenders) and also to others", he added.

The Vijay Mallya-owned airlines has a total debt of about Rs 7,057 crore and accumulated losses of about Rs 6,000 crore.

State Bank of India, the lead lender to Kingfisher Airlines, has said it would not consider any fresh loans for the debt-laden carrier until it raises new equity itself. No professional management

The biggest reason for Kingfisher Airlines decline is clearly Mallyas hubris and wrong management calls at every step of the airlines seven year existence. The beer-baron has never brought in professionals to run the carrier- even the CEOs he hired like Nigel Harwood (who came from Airbus) or more recently Sanjay Aggarwal (from SpiceJet), are never allowed to take their own decisions. KFA has been micro-managed by Mallya. It has also never made a single rupee of profit. He got the model wrong, the equipment wrong and the strategy wrong- sealing the airlines fate in times that were tough for even the best run carriers.

Reason for fall in share price Kingfisher Airlines hit a life-time low Thursday, falling over 7.5 per cent to Rs. 10.20. Shares in the carrier have plummeted more than 80 per cent since the beginning of 2011, shrinking the airline's market value to Rs. 700 crore. Kingfisher, which was India's No. 2 airline until a year ago, has been the biggest victim of turbulence in India's aviation industry, where six main carriers face a total debt load of $20 billion and $2 billion in annual losses. Here are 10 reasons for the sharp drop in stocks today: 1) Worst-ever quarterly loss: The airline posted its worst-ever quarterly loss on Thursday on the back of huge cuts in the number of flights. 2) Losses exceeded estimates: The Vijay Mallya owned high-profile airline lost Rs. 1,150 crore in the quarter to end-March, compared with a loss of Rs. 360 crore a year earlier. Analysts had expected a loss of Rs. 410 crore. 3) The company said its net loss for the year to end-March was Rs. 2,330 crore, more than double its loss in the previous fiscal year. That was substantially more than the Rs. 1,540 crore loss forecast by two analysts, according to Reuters. 4) Crude, rupee hit earnings: The carrier blamed losses on high fuel prices, a weak rupee and an "unprecedented, tough operating environment," but said it would return to normal services within 12 months. 5) Urgent need for capital: Kingfisher needs at least $500 million or Rs. 2,800 crore immediately to keep flying, according to the Centre for Asia Pacific Aviation, but there has been no sign of funding in the near term. 6) Analysts negative on the stock: Analysts say it's difficult for the company to survive. "If the company promoter brings in sufficient funds, to the tune of Rs. 2,000-3,000 crore, only then there is a chance that the company comes back on track", a Mumbai-based aviation analyst told Reuters. "Until and unless the promoter himself puts in money, investors will not come. If he invests, say, Rs. 250 crore, only then investors will get the confidence to invest another Rs. 250 crore," said Sharan Lillaney, an aviation analyst with Angel Broking. 7) No signs of FDI yet: India's plans to allow foreign airlines to invest up to 49 percent in local carriers, which Kingfisher has lobbied hard for, has not yet to be approved, adding to its funding crisis. 8) The airline has not been able to benefit from the strike in Air India. Instead, Jet Airways - the country's top carrier - has gained from the strike. 9) Low-fare and mostly domestic carriers such as IndiGo, the only airline making money in India, and SpiceJet have gained market share as Kingfisher and Air India struggle. 10) Kingfisher Airlines is now the smallest carrier in India by market share.

If Kingfisher fails to turn the airline around, its banks - which have $1.3 billion in loans outstanding would be left to pick over the carcass in a country that does not have a formal bankruptcy process.