THE KING WITHOUT FISHES...!!! [CASE ON CRISIS OF KINGFISHER AIRLINES] Prof. Bhavik M. Panchasara Marwadi Education Foundation’s Group of Institutions, RajKot, firstname.lastname@example.org
ABSTRACT Indian Aviation Industry is one of the fastest growing markets in the world. But nowadays it is in the news due to different reason. And that is the failure of one of the leading aviation player - Kingfisher Airlines. The airline has been facing financial issues for many years. Till December 2011; Kingfisher Airlines had the second largest share in India's domestic air travel market. However due to the severe financial crisis faced by the airline, it has the fifth largest market share currently. Even the company have no funds to pay the salaries to the employees and is facing several other issues like fuel dues; aircraft lease rental dues, service tax dues and bank arrears. This case outlines the financial turmoil of the Kingfisher in detail. Keywords: Aviation industry, Kingfisher Airlines, financial turmoil, financial issues, crisis and debt restructuring
INTRODUCTION: Kingfisher Airlines is an airline group based in India. Its head office is The Qube in Andheri (East), Mumbai; and Registered Office in UB City, Bangalore. Kingfisher Airlines was established in 2003. It is owned by the Bengaluru based United Breweries Group. Kingfisher Airlines, through its parent company United Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red. The airline started commercial operations in 9 May 2005 with a fleet of four new Airbus A320-200s operating a flight from Mumbai to Delhi. It started its international operations on 3 September 2008 by connecting Bengaluru with London.
The airline has been facing financial issues for many years. Till December 2011; Kingfisher Airlines had the second largest share in India's domestic air travel market. However due to the severe financial crisis faced by the airline, it has the fifth largest market share currently, only above Go Air. Kingfisher Airlines is one of the only seven airlines awarded 5star rating by Skytrax along with Cathay Pacific, Qatar Airways, Asiana Airlines, Malaysia Airlines, Singapore Airlines, and Hainan Airlines. Kingfisher operates 250 daily flights with regional and long-haul international services. In May 2009, Kingfisher Airlines carried more than 1 million passengers, giving it the highest market share among airlines in India. Kingfisher also owns the Skytrax award for India's best airline of the year 2011.
VOLUME 3, NO.-1, JAN-APRIL-2012
EISSN 2277-4955 STARTING OF THE CRISES: Ever since the airline commenced operations in 2005, the company is reporting the losses. But the situation became more horrible after acquiring the Air Deccan in 2007. After acquiring the Air Deccan, the company suffered a loss of over Rs. 1,000 crore for three executive years. By early 2012, the airline accumulated the losses of over Rs. 7,000 crore with half of its fleet grounded and several members of its staff going on strike. Following table 1 highlights losses of the company since inception:
Table 1: Net Reported Losses and debts since inception (Rs. In Crores) Year Loss Secured Loans Unsecured Loans Mar-11 -1027.4 5,184.53 1,872.55 Mar-10 -1646.22 4,842.43 3,080.17 Mar-09 -1608.83 2,622.52 3,043.04 Mar-08 -188.14 592.38 342.00 Jun-07 -419.58 716.71 200.00 Jun-06 -340.55 448.16 3.50 Mar-05 -16.79 159.42 125.06
DEBT RESTRUCTURING: In the situation of loss and tough financial condition, the company went for more loans. Table 1 shows the portion of secured and unsecured loans taken by the company. Due to heavy burden of debt and interest, in November 2010, the company adopted the way of debt restructuring and under that total 18 leading lenders, those have landed total Rs. 8,000 crores, agreed to cut interest rates and convert part of loans to equity. As per the contract, lenders have converted Rs. 650 crores debt into preference...