...KINGFISHER AIRLINES (BSE: KFA.BO) EQUITY RESEARCH Investment Analysis Project (BEAM048) Module Coordinator: Mr. Jamie Stephenson Project Supervisor: Mr. Stanley Gyoshev Candidate Number: 005293 Student ID No. 600050722 Word count: 5806* *excludes tables, figures, appendices TABLE OF CONTENTS Executive Summary 5 1. Company Overview 6 A. Branding and Strategy 6 B. Recent Developments 7 2. Industry Review 8 A. Global Sector Overview 8 B. Aviation in India 9 a. Political Factors 9 Opportunities: 9 1. Foreign Direct Investment: 9 2. Infrastructure: 9 3. Debt Restructuring: 9 Threats: 10 1. Freedoms of Air agreements: 10 2. Ground handling Policy: 10 3. Spot Price Controls 10 4. World Politics: 10 b. Economic Factors 11 Opportunities: 11 1. GDP Growth: 11 2. Domestic Consumption and Per Capita Income: 12 Threats: 12 1. Global Recession: 12 2. Oil Prices: 13 3. Inflation: 13 c. Social Factors 14 Opportunities: 14 1. Per Capita Penetration 14 2. Demographics: Growing Middle Class and Urbanization 14 Threats: 15 1. Price Sensitivity: 15 d. Technological Factors 15 1. GAGAN – GPS Aided Geo Augmented Navigation 15 2. Google ITA Deal 15 3. Social Networking Sites 15 e. Legal Factors 16 1. Pilot Licenses 16 f. Environmental Factors 16 1. Geography 16 2. Carbon Foot Print 16 g. Security 16 3. Company Analysis 17 A. Revenues 17 B. Costs 18 C. Fleet Strategy:...
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...Management Accounting 1 Kingfisher Airline Revival Plan Group 8 CONTENTS 1) Introduction | 3-4 | 2) Decision Analysis * Buy or lease decision * Aircraft configuration decision * Pricing decision | 4-7 | 3) Cost AnalysisVariable cost * Commission expense * Fuel cost * Employee costFixed cost * Aircraft leasing cost and depreciation * Landing and navigation cost * Interest expense | 7-9 | 4) Other Recommendation * Transform into low fixed cost structure * Lowering the currency related cost * Practice divisional profitability analysis * Join alliance * Practice grid routing system | 9-12 | 5) Reference | 13-15 | 6) Appendix * Estimation used by the relevant cost analysis * Estimation used by the sales mix analysis * Forecast Operation | 16-17 | 1. Introduction We are going to investigate Kingfisher Airlines (KFA) for in-depth analysis, which would integrate management accounting topics with cost behavior, sales mix, buy or lease decision and pricing decision making. Kingfisher Airlines was an Indian full-service airline established in 2003{1}. It started commercial operations, involving domestic and international flights, on 9 May 2005. On one hand, it was nominated by Skytrax as a world 5-Star Airline for the 2010 ranking period because of its excellent product and service quality{2}. On the other hand, Kingfisher Airlines had not made profit since starting operations in 2005, so it tried to...
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...CASE STUDY Brand Kingfisher : Creating a Lifestyle Brand -- Lekha Ravi Team Leader, The Icfai Research Center, Chennai. The author can be reached at lkhravi@yahoo.co.in The United Breweries (UB) group today (2008) boasts a diverse portfolio of businesses - alcoholic beverages, life-sciences, engineering, aviation, agriculture, chemicals, information technology and leisure. The man behind this potent diversity is none other than India's flamboyant tycoon Vijay Mallya (Mallya). Mallya's association with the rich, trendy and the luxurious seems to have rubbed off on his brands. All through his glitzy forays into various fields, Mallya has fastidiously endorsed Brand `Kingfisher'. His entry into aviation with the glamorous launch of Kingfisher Airlines drew a lot of its brand equity from Mallya himself. Media reports often analyze how Mallya promotes the `Kingfisher' brand by associating it with lifestyle events like horse-racing, Formula 1 racing and prestigious launches. Reflecting on how he contributes enormously to it through his own flamboyant lifestyle, it is pertinent to probe into the prospects of Kingfisher's brand extension. The Kingfisher brand has come to epitomize a lifestyle that encompasses some of the finest things in life and is today synonymous with delivering a premium experience. - Vijay Mallya Brand Kingfisher I am the brand ambassador; I am the `King of Good Times',said Mallya, the brainchild of Kingfisher brand launched in the year 1980. Reports say...
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...MKTG 603 Major Assignments SECTION 1 VALS is a psychographic segmentation. VALS survey is a tool to predict consumer behavior . It helps to identify, segment and find the target customer . According to the VALS survey taken by me, it concluded that i was an Experiencer and my secondary type is Achiever. Though my achiever profile wasn't that accurate. The primary VALS type represents the dominant profile of the individual and the secondary type shows the person secondary image . Experiencer are motivated by self expression. Young, enthusiastic, and impulsive consumers. I am sometimes motivated with self expression. I often spend money on new products and experiences. It is the new experience which matters than having the same daily routines. Example.Travel fairs are a major attraction to me and in order to use my energy i am regularly visiting the gym Achievers are consumers who have goal oriented lifestyles and a deep commitment to career and family. Their social lives are basically structured around their social values. They don't respond to changes well as they are conservative and lives conventional lives.I do like to have durable products. As an example in order to achieve my goal i have structured my whole study career. Section 2 Dell company uses a lot of social media to engage with its customers online and market their product. Dell uses its community page from where consumers can access to a range of blogs reflecting its business segments...
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...ORGANISATIONS- THEORY AND PRACTICE PROJECT – WORKSHEET 1 group- L2 Name of the Adopted Company : United Spirits Limited The business the company is into: United Spirits Limited is the largest spirits company in the world by volume. United Spirits Limited (USL) is involved in the production, distribution and sale of alcohol beverages across different regions in India. It is also involved in the exports of alcohol beverages to over 37 countries thus enjoying a global footprint as well. Besides Whyte & Mackay and Bouvet Ladubay being 100% subsidiaries of USL, the company has 22 millionaire brands (selling more than a million cases a year) in its portfolio and enjoys a strong 59% market share for its first line brands in India. Its brands include Dalmore, Black Dog Reserve Scotch Whisky(Scotch); Antiquity Blue, Signature(Indian whisky); Honey Bee(Brandy); Blue Ribbon( Gin); Romanov(vodka)etc. A brief introduction to the History of the company: The company was established in 1826 by McDowell & Co as a trading company with its headquarters in Madras, by an enterprising Scotsman Angus McDowell. McDowell’s rapidly became the preferred purveyors of fine imported liquors and cigars that gratified the rich souls in the British India. In 1951, Vittal Mallya acquired McDowell’s initiating a new era in the history of the company. Its first distillery was established in Cherthala in 1959 in Kerala and began bottling brandy. Its first product was launched in 1962 which...
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...RISE AND FALL OF KINGFISHER AIRLINES IN THOSE YEARS. Indian Aviation Industry It is one of the fastest Growing Aviation Market. There are approximately one billion people and 0.05% of them fly. More and more middle class families now prefer air transport than other traditional mode of transport. The Indian travel market has nearly tripled to $ 51 billion by 2011, from $16.3 billion in 2005-06. Origin of Indian civil aviation industry India occupies an eminent position in the civil aviation sector with a large fleet of aircrafts. Estimates show that the domestic and international passenger traffic in India is growing tremendously PEST ANALYSIS – AIRLINE INDUSTRY Political Factors India’s political environment – Tension with Pakistan, Government’s inability to control issues (riots etc) September 11 th - huge drop in air traffic due to safety and security concerns Trade relations with other countries have to be good Economic Factors Recession- airlines are considered as a luxury High operation costs due to low demand resulted in laying off employees Social Factors People from varied income groups have to be catered Destination, kinds of food served have to be chosen carefully Technological Factors Use of Internet- online ticket booking, updated flight information & handling of customer complaints restructuring the existing airports to world class appeal Porters 5 forces Threat of New Entrants is low The airline industry is so saturated...
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...United Breweries Limited and United Spirits PORTERS FIVE FORCES MODEL Competitors: The competitors like Seagrams, Fosters, Johnie Walker offer stiff competition to Kingfisher. Inrivalry competitors try to grab each other’s market share by introducing price wars, advertising battles and new product introductions. Currently United breweries are the market leader in beer segment which places it ahead of its competitors. This is because of its investment in theResearch and Development sector in liquor industry which enables it to introduce new brandsrapidly. It has been present in India for many decades which give it an advantage of strong brandloyalty and also a strong brand image. Threat of new entrants: There are many other emerging brands which are coming up in India. As the lifestyle in urbanareas is increasing the per capita liquor consumption is also increasing. These trends are invitinga lot of new foreign companies who willing to expand in the growing Indian market. Severalforeign brands have made brand associations and are marketing their brands aggressivelythrough various point-of-sale promotions throughout their distribution networks. Buyers: As the liquor consumption in India increases the customers also see their power increasing. Inalcohol industry the brand loyalty is not there. So when more and more brands enter the marketthe customer goes for the cheapest brand in the same volume and alcohol limit bracket. Substitutes: In India the primary segments...
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...] have doubled in a little over a month in anticipation of a reverse merger of Kingfisher Airlines [ Images ] into Deccan Aviation. Deccan shares climbed to a 52-week high of Rs 335 in intra-day trade on Wednesday, before closing at Rs 295. Strangely, a day after Vijay Mallya [ Images ] 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. Airline experts say Mallya has a tough job on his hands. "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,'' said an airline expert and investor. History is not on Mallya's side. Full-service carriers and low-cost carriers (LCC) belong to separate worlds, and their DNAs seldom match. Whenever they have tried to merge or work together under one umbrella, they have nearly failed. It happened when British Airways tied up with budget carrier Go, and when Delta Air acquired budget carrier Song. This, despite the fact that these were subsidiaries, whose operations were independently managed. ''Analysts and investors are paranoid about the features of the LCC model. They don't like even the smallest deviation,'' said a former airline executive who requested anonymity, as he was employed by one of the two airlines. In fact, when Deccan planned an inflight magazine (to communicate with its...
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...17-10-2015 ORGANIZATIONAL BEHAVIOUR-II Session:2 KINGFISHER AIRLINES MANAGING MULTIPLE STAKEHOLDERS Anisha Goyal 19/246 B Abhishek Sharma 19/249 Madhu Garg 19/267 Sudhina Abraham 19/289 Varsha Murali 19/296 Vinita Chauhan 19/298 1. To what extent can the problems of Kingfisher Airlines be attributed to management of its stakeholders? All the critical problems faced by Kingfisher airlines can be traced back to mismanagement of stakeholders and their interest: CUSTOMERS • Removal of entertainment center from flights which was Kingfisher airlines unique selling point SUPPLIERS • Defaulted on supplier payments EMPLOYEES • No salary for three months SOCIETY • Started cannibalizing components and parts from the grounded aircraft which was a safety concern OWNERS/INVESTORS • The decision to merge Kingfisher and Air Deccan was a mistake. Kingfisher airlines and Kingfisher Red offered similar services without leveraging the benefits of full service or low costs. These bad strategic decisions eventually led to default of loan repayments. Owing to the same reasons shareholders also lost their money 1 17-10-2015 2. Which of the stakeholders were engaged more than others, whose interests seemed to be guarded and whose ignored? • • • • The company focused only on the costumers by providing high quality services and kept neglecting other stakeholders, which eventually led to bankruptcy. Things like high-end flight furniture, TV...
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...Deccan-Kingfisher Combine To Look At Share Sale December 20, 2007 Deccan Aviation will merge the scheduled airline operations of unlisted Kingfisher Airlines, to create one of the biggest air carriers in the country and pave the way for the latter to fly overseas. The combined operations will need about USD$250 million - USD$300 million over the next two quarters and it may look at private placement of shares, UB group Chief Financial Officer Ravi Nedungadi said. India's top spirits maker UB group, which runs Kingfisher Airlines, bought a 26 percent stake in Deccan in May and subsequently raised it to 46 percent. Deccan will be called Kingfisher Airlines after the merger and the charter operations of Deccan will be spun off into a separate firm to be equally owned by Deccan's founder G.R Gopinath and the UB group, Deccan said. The combined entity will operate the two brands -- Deccan, a low-cost airline, and Kingfisher, a full service carrier, Nedungadi said. "The two board's have taken a decision. The legal process will take anywhere between 4-6 months. From an organizational point of view the the integration is already on the fast track," he said. The merger was recommended by consultancy firm Accenture and the merger methodology will be suggested by consultants KPMG and Dalal and Shah. "The merger will be structured in such a way to allow us to carry forward the accumulated losses," Nedungadi said. The two airlines have a combined loss of about INR20 billion...
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...KINGFISHER CRISIS AND ITS CAUSES THE CRISIS Warren Buffet once wrote, “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.” (Kaul V, 2012) – This statement is epitomized by the case of the Kingfisher airlines. Ever since it commenced operations in 2005, the airline has never posted any profits, despite having been endowed with huge amounts of capital. Its losses and debts are aggravating and accumulating with each passing year. For the many banks including SBI that borrowed huge amounts of money to this loss making enterprise, Kingfisher has now been recorded as a non performing asset (NPA). Kingfisher entered its worst ever crisis since October last year - By early 2012, the crisis had got so bad that the airline accumulated total losses of over $ 1.27 billion. Moreover, the market share of Kingfisher airlines in the Indian aviation sector fell drastically – while it boasted of having the second largest market share in October last year, its market share has now fallen to the lowest of any Indian airline in April. To make things worse, the airline has had to cut the number of its flights to about 120 a day, down from about 340 daily flights. (Hatif T, 2012; Parija P, 2012 ). There were a large number of flight cancellations too. In addition, in May 2012, the Indian aviation director even threatened Kingfisher that it would lose its flying slots if it did not pay the income tax of Rs...
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...decision to close Kingfisher Red and how it has got to do with the organization culture more than anything else. I think that why Kingfisher failed to bear the fruits of acquiring Deccan is essentially why most M&A’s fail. Cultural disparities!! Technology: 1.Kingfisher is the largest Indian private airline and has their own reputation in the market. Kingfisher was the first largest Indian airline to have in-flight entertainment systems on every seat even on domestic flights. All the passengers were given a kit consisting such as a pen , facial tissue and headphones to use with the IFE system. The passengers were able to watch only recorded TV programming on the IFE system, but after the advancement of technology, an alliance was formed with Dish TV to provide live TV in-flight.. 2. On the month of July 14th 2008, Kingfisher introduce its first ever Wide body aircraft , a Airbus A330-200 at the Farnborough Air show held in July 2008. Kingfisher's first Airbus A330-200 was widely billed as the best A330-200 ever built by Airbus. 3.On the month of September 3, 2008, Kingfisher started its international services by connecting Bangalore with London. On the month of 15th sept.2009� the London service was withdrawn due to some problem arises. ETHICS :- ETHICAL CULTURE(This all is very important for company future and yes for employee because you know that Healthy environment, better company future.) One of the largest private airline named Kingfisher airlines We or our or...
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...The name Kingfisher is a household name in India, it’s a refreshing beer and we can call it the Budweiser of India. Making some good profits in the brewery Industry, the CEO, Vijay Mallya ventured into the Airline Industry and launched Kingfisher Airlines commencing operations in 2005. Ever since that company has been running on a loss and right now, it’s almost in bankruptcy. Exhibit 1: Profit/Loss: Courtesy Wikipedia, Numbers in Indian Rupees (X 10 million), EPS in Rs A lot of things have gone wrong with the operations of this airline which has resulted in a big crisis for all its stake holders, not limited to its employees, its lenders, airline partners, stock holders and its flight leasers. Kingfisher Airlines has more than 80000 Million Rs in debt with very little cashflow. So what went wrong? 1) Addressed the wrong market initially? It targeted the business class initially with fewer economy seats in its planes. Result: Empty business class seats and mounting losses. Under current economic conditions in India, there was more demand for economy coaches and lower cost airline tickets. He failed to understand the mentality of the mass. 2) Acquiring Air Deccan: In order to rectify its position, king fisher acquired a low cost/profitable economy carrier named Air Deccan and re-launched it as Kingfisher Red. This acquisition came at a heavy cost and besides, the CEO of Air Deccan Lt Gopi was set aside and the operating principles/philosophies were...
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...Finance Government of India AIRPORTS SECTOR EXISTING SCENARIO 1. The civil aviation traffic has seen an unprecedented traffic in the past few years on account of booming Indian economy, growing tourism industry, entry of low cost carriers in the private sector, liberalization of international bi-lateral agreements and liberalization of civil aviation policy. In future also the civil aviation traffic is expected to grow at the same pace despite current slowdown due to global recession. But airport infrastructure has not kept pace with the growth of the civil aviation traffic. This has resulted in congestion and inefficient services in major airports, limited landing slots, inadequate parking bays and congestion during peak hours for airlines. Development of quality infrastructure will have an impact on international competitiveness and economic growth. This requires faster development of civil aviation infrastructure on public private partnership mode. In tune with the requirement many initiatives have already been started in the 10th five year plan and they are expected to continue in the 11th plan also. 2. Of a total number of 454 airports and airstrips in India, 16 are designated as international airports. The Airports Authority of India (AAI) owns and operates 97 airports. A recent report by Centre for Asia Pacific Aviation (CAPA) states that over the next 12 years, India's Civil Aviation Ministry aims at 500 operational airports. The Government aims to attract private...
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...The financial agonies for Kingfisher Airlines (KFA) are seeming to become insurmountable. After being forced to massively scale down its operations and ground more than half of its fleet in the month of Feb 2012 when the IT-Dept froze its bank accounts over non-payment of tax dues, the estranged airliner has now cancelled all of its international operations and has the aviation regulator (DGCA) as well as the govt. breathing down its throat questioning the company’s ability to come up with a credible plan and revive the failing fortunes. The cash-strapped airlines may need Rs 3000-4000 crore to get itself back on its feet. The airline is burning cash at a rapid rate and it is no wonder that they are asking banks for additional working capital. Approximately 23% of the company is now owned by the banks that are already on the hook for approximately Rs 5,000 to Rs 6,000 crore of debt. They haven’t been paying their creditors for quite some time now. In the absence of additional capital coming into the company, Kingfisher has had no choice but to cut down on the operations, which is not a good sign because if you cut down on operations it will only cause further problems – they need to be in operation to repay their liabilities. All this is further putting pressure indirectly on the creditors to restructure the terms. So dire are Kingfisher’s circumstances that it recently bounced a $3m cheque to the Airports Authority of India, to which it owes around $40m in fees. Recently...
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