Startup of Kingfisher Airlines
Indian
Airlines industry Air India was started by JRD Tata in July 1932 as Tata
Airways. That airways was now known as Air India as it was taken over by Indian
Goverenment. Kingfisher Airlines was established in 2003 it is owned by
Bengaluru United Breweries limited i.e. UBL group of Vijay Mallya. Airlines
started its commercial operations from 9th May 2005 with four new
Airbus operating a flight from Mumbai to Delhi. Kingfisher Airlines never comes
in profit since it’s foundation in 2005.
It started its international operations on 3 September 2008 from Bengaluru to London.
Kingfisher
airlines touched many highs in starting period but what leads to Kingfisher
Airlines downfall as Indigo Airlines still making good profit in India.
Everyone knows in India is Vijay Mallya is of Flamboyant Nature and
undeciplined nature leads to failure of Kingfisher Airlines.
Main reasons
behind downfall of Kingfisher airlines:-
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Initially Kingfisher Airlines launched
only all economy class airplanes with food and entertainment after 1 year of
operations in economy class they suddenly shifted to luxury class. As they
shifted from economy to Luxury class they keeps on changing there airplane
models and keeps on expansion and never in the system to stabilize airlines. Kingfisher Airlines reports net loss of year ending 30th
June 2006 was Rs. 3.4 billion,Kingfisher Airlines was soon become an airline like five star air travel and was becoming famous among business travellers.
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In December 2006 Kingfisher
announced to provide entrainment in flight by tie up with DTH pioneer Dish TV India Limited.
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The income for period ending 30th June 2007 increased to INR 4.1 Billion but losses also rises
to INR 4.19 Billion
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Kingfisher Airlines was right on
track up to 2007 with Kingfisher had carried 17.5 million passengers with 41
aircrafts and schedule of 255 flights.
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In Year 2008 Kingfisher
Airlines Merged with Air Deccan which was founded by Captain G R
Gopinath in 2003. Kingfisher Airlines downfall started as soon as they bought
Air Deccan. Kingfisher spends up to Rs. 550 Crore in buying a domestic carrier
which had losses of over 550 Crore.
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In
2008 when recession hits whole world Jet fuel prices touched $150. That makes
very tough to survive for Airlines.
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Financial statements for year ending March 31st 2009
after acquiring Air Deccan shows that income increased to Rs. 55 billion but
lossed increased to Rs. 16 Billion .
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In Year 2009 Kingfisher Airlines leads
Indian Aviation Industry with market share of 22.9%
with 11 Million passengers flying
with Kingfisher in last fiscal year. The fleet although got reduced to 68 aircrafts from 77 aircrafts and
domestic flights per year got reduced
to 366 but international operations
increased significantly to 12 flights daily.
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Year ending 31st March
2010 losses increses to Rs. 16.4 billion and gross income reduced to Rs. 52.7
billion.
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In year 2010 Jet Airways becomes
India Largest Passenger carrier with Indian Passenger carrier Share of 25.5 %
and Kingfisher Airlines share comes down to 19.8%. IndiGo first comes into
light which reported 90% occupancy Kingfisher’s domestic
daily operations were same 366 flights
daily but its international operations
increased to 28 flights daily.
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Year Ending 31st March
2011 airlines reported an increased gross income of Rs. 64.9 billion and
reduced losses of Rs. 10.2 billion.
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At that Juncture 1st time
that it have serious cash flow problems they blamed the same for rising fuel
prices. Things get worsened so much that kingfisher was unable to pay dues
of oil companies.
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Pilots starts leaving Kingfisher and
in 2011 few pilots leave Kingfisher. SBI
biggest creditor to Kingfisher
starts giving warning to the firm that if they are unable to raise funds
atleast 160 million dollars in equity then they will not restructure their
debt.
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The income for year ending 31st December 2011 stood at approx. INR 13.4 Billion which was lowest since 2007 and the losses increased sharply
to INR 4.4 Billion .
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On 5th January 2012 State Bank of India declared Kingfisher
Airlines debt as NPAi.e. a non‐performing asset. SBI’s exposure to Kingfisher is staggering over INR 14.5 Billion.
Debt
Piles up so much to Kingfisher that
creditors filed suits Kingfisher and that will forced Kingfisher to
ground majority of aircrafts.
Kingfisher Airlines definitely needs to raise fresh capital as well.Banks did give Kingfisher
one last chance last year by infusing capital which was on request converted into shares
but due to landslide fall in share
price of Kingfisher, the investments of
Banks have almost eroded.
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Kingfisher Airlines founded in 2005
but never comes in profit since it’s operations.
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Kingfisher airlines stock touched
life time high of 290.10 Rs./ Share in 14th Dec 2007 now trading at
2.60 Rs/Share on 28th Feb 2014 with life time low of 2.51 Rs/Share,
What else required to explain that how they erode investors money.
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KFA has debt of RS 7500 Crore debt from banks against securities
of nearly Rs 2000 crores which includes guarantees of UB Holding and United
Breweries, shares of united spirits, Mangalore Chemicals, Mcdowell's and other
tangible security like the villa in Goa and Kingfisher's other premises.
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Main lenders to Kingfisher
are SBI, Bank of Baroda, Bank of India, Punjab National Bank and United Bank.
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Banks are very much hopeful that the KFA management will be
able to bring an investor such as Etihad and infuse Rs 650 crores into the
company and restart its operations.
Kingfisher
was founded in 2005 is gifted to Mr . Sidhartha Mallya who was Just 18 years
old that time. But Sidhartha Mallya always busy on petty things like parties
and Kingfisher calendar which is well known by everyone and that lead to inadequacies
in his finances.
IPL is also added to Kingfisher
fall as huge amount get divered to IPL from Kingfisher airlines. Even few time
ago Mallya requested government to bail out their company but Ajit Singh
Aviation Minister that time told that they will not bail out a private carrier
as Air India already needed bailout. Kingfisher reputation even worsened when
it came in limelight that employees tax were not submitted to government on time
since the last three years. Government of India also freezed 40 Kingfisher’s
bank account. Mr Mallya then sell 49% of his ownership of Force India( F1 car)
to Mr Subrato Roy to get kingfisher going but it too failed to save the
airlines from tatters.