ECONOMICS

Bailout package to Kingfisher should be given or not

Kingfisher Airlines

The History
Established in 2003 and commercial operations in 2005

Pay More Get More pricing All new aircrafts on lease Acquires Air Deccan Not yet reached BEP

Market Share

KINGFISHER
Currently in India there is been a debate about giving bailout to KINGFISHER AIRLINES, one of the leading companies in aviation industry in the country. Kingfisher since its launch has blazed a trail of innovations and introduced a range of market-firsts that have completely redefined the whole experience of flying. Kingfisher Airlines was the first Indian airline to introduce in-flight entertainment (IFE) system on domestic flights.

 On December 19th, 2007 Air Deccan and Kingfisher Airlines decided to merge. In May 2009, Kingfisher Airlines carried over a million passengers which provided it with highest market share among the airline companies in India.

THE FALL
Post 2010 things didnt look well for kingfisher. Kingfisher airlines failed to pay its debt to their creditors. Post November 2011 news of Kingfisher asking for bailout on the matter started coming in.

7000 6233.38 6000 5269.17 5000 5067.92

amt (in cr)

4000 Sales 3000 Net loss 1370.39 992.76 1000 305.2 0 Jan-05 Jan-06 Jan-07 Jan-08 financial years Jan-09 Jan-10 Jan-11 1.86 745.79 253.12

2000

1800.21 1456.28

1613.3

Kingfisher Airlines is a part, has lost nearly half of its market value from its peak scaled in the past one year. It was further found that the company suffered a heavy loss of 1027 crores rupees.

REASONS FOR THE FALL OF KINGFISHER

Lack of delegation
Frequent changes Lack of focus and long term strategy 'Treated as a step-child Pet project

Inability to understand the customer needs

Bailout
A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall.

Examples of Bailout
YEAR ENTITY

2008 2008 2009 2009

2012

Citi Group Inc. American International Group Inc. Merril Lynch by Bank of America Dubai and Dubai world by Abu Dhabi
Greece economy by EU

Problems in giving Bailout

Mallyas optimism is not shared by its bankers and financiers because Kingfisher Airlines has accumulated losses of over Rs 4,283 crores (Rs 42.83 billion) as at the end of March 31, 2011. Experts say the airline never made any profit since its launch in 2005.
Kingfishers total debt reportedly slid to Rs 7,057 crores, yet alarmingly high for a private domestic carrier. Kingfisher shares were once valued at $245 million. They came down crashing by more than 60 percent in 2011. airline to cancel numerous flights

SBI Role
Kingfishers future is very much uncertain despite claims of fresh infusion of capital because the promoters are not naming the sources of its equity. the bank cannot make lend afresh to the airline unless the promoters show an equity of about Rs 800 crores as a collateral for the new line of credit.

Advantages
The company revolutionized the Indian aviation sector by bringing in high innovation and smart techniques. It will not be feasible to lose such a company considering its vital role in Indian aviation industry.

Bailout will help company to regain its lost momentum. To restore its lost prestige in the market.

Continues
Company employees will get their salaries which are long pending due to losses faced by the company.

Since Kingfisher hold a high percentage of sectors in the market regaining its lost amount will surely help the Indian economy.

Disadvantages
High risk

Irresponsible behavior of kingfisher

People Money King of good times? Kingfisher is not aviation industry

Recent Happenings
Vijay Mallya may sell United Breweries stake to Heineken Tycoon Vijay Mallya, scrambling to raise funds to rescue his ailing Kingfisher Airlines Ltd, is considering the sale of all or part of his stake in United Breweries(UB), his flagship beer business, to Dutch brewer Heineken NV, said people familiar with the situation. They added that Mallya has the option of selling a stake in UB to ease his financial woes, and Heineken would be a keen buyer to gain control of India's biggest brewer and maker of Kingfisher beer.

 Heineken in talks for control of United Breweries: Reports The Financial Times, citing a person familiar with the matter, said Mallya was close to selling 13% of United Breweries Ltd, worth about USD 370 million at current market prices, to Heineken. That could give control of United Breweries to Heineken, which already held 37.38% of India's largest beverages group as of the end of 2011.

 Kingfisher stops operations to many destinations Debt-laden Kingfisher Airlines said it temporarily stopped operations to several destinations as per its revised flight schedule, and most employees at those places have been asked to "stay at home." "We are in a 'holding' pattern right now and are waiting for various decisions from the government and our consortium of bankers on FDI (foreign direct investment) policy, working capital funding, etc," Kingfisher said in a statement.

 ICICI Bank asks Kingfisher to top up loan security ICICI Bank has asked embattled Kingfisher Airlines to top up its loan security or adjust the loan amount after the ailing carrier's stock took a severe beating in recent weeks, the airline said. ICICI Bank has lent about Rs 4,300 crore to Kingfisher. ICICI Bank has lent about Rs 600 crore to Kingfisher. It acquired stake when the airline converted a part of its loan to equities and issued those to lenders as part of a debt recast package

 The bank has also seen its inflows dry up after the carrier began cancelling its flights as it was the only bank which had access to Kingfisher's revenue from ticket sales. The airline's shares have lost over 60% in the past one year, and on yesterday's crash was due to speculation that the directorate general of civil aviation (DGCA) would give its report on the airline to the civil aviation ministry

 SBI Cap's viability report on KFA no longer valid: Sources The viability report on Kingfisher Airlines (KFA) prepared by SBI Caps is no longer relevant, say sources in the know. This report was to be implemented from next month onwards Hired by the airline to assess its business and recapitalisation needs, SBI Caps had pegged KFA's short-term funding requirement at over Rs 440 crore. The report also suggest a capital infusion of Rs 1,500

Conclusion

THANK YOU!!!