Kingfisher - Air Deccan

Merger
Presentation on
International Business
 Presented by
•Manish K Gupta
•Rudolf D’souza
•Nimisha Singh
•Darshan Sathaliya
 Contents
•Aviation Industry
•About Kingfisher
•About Air Deccan
•Vision and Goals
•Reasons behind the Merger
•The Merger
•Industry Perspective and Analyst’s views
•Stock Reaction
•Financials
•SWOT
•Conclusion
 Aviation Industry
• Dominance shift to Private Players
• 75% domestic market dominated
by private airlines
 About Kingfisher Airlines
• Launched by Dr. Vijay Mallya 2
years ago
• Bangalore based company
• Started with a fleet of 4 Airbus
A320 aircrafts
• Now has a brand new fleet of 8
Airbus A320 aircraft, 3 Airbus
A319-100 aircraft and 4 ATR-72
aircrafts
 About Air Deccan
• Is India’s first low-cost airline
• part of Deccan Aviation Private
Limited, India's largest private
heli-charter company
• Established in 2003
 Visions and Goal

“To entice 700 million

Indians throughout the country to
climb aboard it planes”
 Reasons Behind Merger
• Merging with Deccan and becoming a
single corporate entity, Kingfisher will
have and equal right to fly overseas and
expand its presence in the subcontinent
with a combined fleet of 80 aircraft.
• Kingfisher Airlines - Air Deccan have is
commonality of fleet. With the same
family of planes on both sides, there
could be significant reduction of cost,
since many facilities like engineering
could be shared.
 Reasons Behind Merger
• To mutually utilize respective
operational efficiencies to their
advantage as both the airlines are in the
red. While Deccan Aviation reported a
loss of Rs 419 crore for the year ended
June 30, 2007, Kingfisher Airlines had a
loss of Rs 577 crore on its books for the
year ended March 31, 2007.
• To capture greater business in both the
top-end and cut-price markets in a
fiercely competitive aviation market.
 The Merger
“Kingfisher Airlines recently
acquiring 46 per cent in Deccan
Aviation through a two step process”

• Kingfisher Airlines acquired 26 per

cent in Deccan Aviation and then
made a public open offer for
shareholders of Deccan Aviation
• He then upped the ante by buying
an additional 20 percent through an
open offer for Rs. 5.7 billion
 Industry Perspective and
Analyst’s View
“I don't know if this would work. Mixing everything
in one company doesn't work. It will have a full-
service airline, a no-frills airline, plus
international operations under one umbrella”

“It will depend on management experience,

knowhow and, foremost, the ability to act and
react without interference from their respective
boards” Steve Forte, former CEO of Jet Airways

“Earlier experiments have not worked because they

were not planned well. Qantas was successful
because it maintained a distinction between the
two operations” Kapil Kaul, CEO, Centre for
Asia Pacific Aviation
 Stock Market Reaction
• Strangely, a day after Vijay Mallya
announced his plan to merge Kingfisher
into Deccan, the budget carrier's stock
fell more than six per cent to Rs 277,
even as the BSE Sensex gained 70.61
points.

• Shares of Deccan Aviation fell in

Mumbai as investors turned skittish on
news of a merger between the low-cost
carrier and billionaire Vijay Mallya’s full
service Kingfisher Airlines.
 Financials
• The Deal: Vijay Mallya paid Rs 550 cr to acquire a
26% equity in Deccan. Subsequently, he paid an
additional Rs 418 cr for a further 20% stake
through an open offer

• Enterprise value: Rs 2,115 cr when Mallya

acquired 26%
 
• Market Share of Air Deccan: 18%
 
• Fleet with Air Deccan: 43
 
• Combined market share: 29%
 SWOT
• “The first obvious advantage that
Kingfisher Airlines - Air Deccan have
is commonality of fleet”.
• Scarce manpower can be optimally
utilised.
• Insurance premium and lease
rentals can be re-negotiated,
infrastructure like engineering,
ground handling, training can be
combined.
 SWOT
• Current aviation policy wouldn't allow
Kingfisher to begin flying overseas for
another three years, because of policy
regulations.
•  Change in work culture and processes
have begun to surface with a brand
name change for Deccan being toyed by
Kingfisher.
•  Changes already have begun to surface
with a brand name change for Deccan
being toyed by Kingfisher.
 Conclusion
• Earlier air travel was a privilege
only a few could afford, but today
air travel has become much
cheaper and can be afforded by a
large number of people.
• Now with the merger of
Kingfisher and Air Deccan the
future prospects of Indian
aviation sector look bright.