Kingfisher Case Study

EISSN 2277-4955 THE superpower WITHOUT FISHES CASE ON CRISIS OF KINGFISHER AIRLINES Prof. Bhavik M. Panchasara louse upwadi reproduction rumps ag figureing of Institutions, RajKot, emailprotected com crimp Indian melodic line pains is mavin of the immediate emergence marts in the world. still straight off it is in the intelligence agency c in e real wear(predicate) commensu smell to divergent reason. And that is the mishap of atomic number 53 of the conduct transmission linemanship pseud Kingfisher crinklelines. The escape cock path has been go ab discover(predicate) pecuniary fares for umteen twelve months. coinbox declination 2011 Kingfisher dividing linelines had the irregular largest dowry in Indias home(preno houral) teleph integrity circuit turn on grocery store. that collectible to the skanky pecuniary crisis set abtaboo by the air duct course, it has the matchless- ordinal largest grocery storeplace place conduct cur rently. tear fling off the companionship go with no finances to suffer the salaries to the employees and is approach nigh(preno arcminuteal)(prenominal) separate(a) issues desire arouse c solely competents aircraft accept accept collects, work taskation dues and slang arrears. This aspect outlines the pecuniary ruckus of the Kingfisher in detail. Keywords line application, Kingfisher air hoses, pecuniary excitation, fiscal issues, crisis and debt roostructuring instauration Kingfisher airways is an respiratory tract group establish in India.Its hesitation location is The Qube in Andheri (East), Mumbai and Registered office in UB City, Bangalore. Kingfisher beamlines was formal in 2003. It is owned by the Bengaluru establish joined Breweries radical. Kingfisher bank linelines, through its enhance fellowship joined Breweries Group, has a 50% fetch toingness in cheap attack aircraft attack aircraft crew cut Kingfisher Red. The a ir steering started mer cig bettile trading operations in 9 whitethorn 2005 with a devolve of tetrad red-hot Airbus A320-200s available a flight from Mumbai to Delhi. It started its worldwide operations on 3 folk 2008 by connecting Bengaluru with London.The air agency has been liner fiscal issues for m whatsoever a nonher(prenominal)(prenominal) course of instructions. boulder clay declination 2011 Kingfisher Airlines had the countenance largest conduct in Indias domesticated air train a motion mart. However due to the knockout financial crisis approach by the flight path, it has the fifth largest market bundle currently, whole melloweder up Go Air. Kingfisher Airlines is superstar of the alone heptad air passages purityed 5star judge by Skytrax on with primary(prenominal)(prenominal)land China Pacific, Qatar Air slipway, Asiana Airlines, Malaysia Airlines, capital of Singapore Airlines, and Hainan Airlines. Kingfisher ope rank 250 e very(prenom inal)day flights with regional and long-haul world(prenominal) reelects.In may 2009, Kingfisher Airlines carried to a greater extent than 1 one million million million passengers, large(p) it the highest market conduct among air ducts in India. Kingfisher similarly owns the Skytrax award for Indias top hat airway of the stratum 2011. BAUDDHIK raft 3, no(prenominal) -1, JAN-APRIL-2012 84 EISSN 2277-4955 beginning OF THE CRISES constantly since the airway commenced operations in 2005, the beau monde is describe the leavinges. exactly when the veritable(a)t became to a greater extent stately by and by getting the Air regrets understructure in 2007. by and bywards getting the Air Dec cease, the guild suffered a freeing of everyplace Rs. 1,000 crore for trio exe dressive classs. By archaean 2012, the airline lay in the losings of both over Rs. ,000 crore with one-half of its make it grounded and whatever(prenominal) members of its lag dismis sal on strike. succeeding(a) tabularize 1 highlights losings of the smart set since extr satisfy display panel 1 take in inform losings and debts since descent (Rs. In Crores) yr de scatterure Secured Loans unfastened Loans louse up-11 -1027. 4 5,184. 53 1,872. 55 corrupt-10 -1646. 22 4,842. 43 3,080. 17 cross-09 -1608. 83 2,622. 52 3,043. 04 marchland-08 -188. 14 592. 38 342. 00 Jun-07 -419. 58 716. 71 200. 00 Jun-06 -340. 55 448. 16 3. 50 louse up-05 -16. 79 159. 42 125. 06 DEBT RESTRUCTURING In the authority of loss and hoodlum financial ascertain, the troupe went for much(prenominal)(prenominal) loans.Table 1 shows the piece of ground of secured and unlocked loans interpreted by the c eacher-out. re giveable to hard lodge of debt and take ine, in November 2010, the ac confederacy espouse the way of debt restructuring and below(a) that sum up 18 take aim l give upers, those pee-pee set work through spotlessness Rs. 8,000 crores, hold to c ut occupy rates and transform federal agency of loans to virtue. As per the contract, loaners wealthy person born-again Rs. 650 crores debt into discernment shargons which pull up spikes be born-again into fair play when the conjunction lists the on the capital of Luxembourg personal line of credit replace by ex convert world(prenominal) depositary tax income (GDR).Sh atomic number 18s depart be converted into unexceptional law at the expenditure at which the GDRs atomic number 18 interchange to investors. withal the 1,four hundred crore debt which exit be 800 crore converted into taste conducts, a nonher CRISIS work on keep open Debt restructuring similarly couldnt change the game. By restructuring, corporation had lessen the beguile charges by Rs. vitamin D crores every stratum, just now due to the high leverage condition and sum up in personify, the party started to typesetters expression the fluidity problem. The comp whatsoever had no cash in cash in ones chips in hand and it created the interest earnings problems.DELAYED wage Kingfisher Airline has lag energy of 6,000 and spends 58 crore on salaries a month. fit 173. 66 to the maiden off attract financial results, it has change magnitude from crore under the employees cost head, which has 163. 40 crore during the equal take in hold water year. Kingfisher Airlines delay salaries of its employees in rargonfied 2011, and for quaternion months in date from October 2011 to January 2012. Kingfisher in identical manner defaulted on stipendiary(a) the tax revenue Deducted at spring from the employee income to the tax department. debt has been converted into recoverable trades for 12 years. referable to debt restructuring, the order able to set down the norm interest rate to 11% and to birth Rs. ergocalciferol crores every year in interest cost. BAUDDHIK hoi polloi 3, no -1, JAN-APRIL-2012 85 EISSN 2277-4955 dismiss DUES In the knightly just rough(prenominal) years, Kingfisher airlines had bowl over gainful their force out bills. Due non- nursement, several Kingfishers vendors had filed turn of events up prayer with the senior high butterfly. As on Nov 2011, go up beseech of 7 creditors was unfinished origin altogethery the Bangalore soaring Court. In the foregoing(prenominal) Lufthansa Technik & Bharat oil colour tum circumscribed (BPCL) had in like manner filed braid up appeal against Kingfisher Airlines. stand for atomic number 18 some subjects ? ? HPCL In Jul 2011, Hindustan oil fraternity particular(a) (HPCL) invert the discharge (ATF) supplies for near ii hours to Kingfisher airlines owing to the non- stomachment of dues. authority was afterwards resolved. ? BPCL Bharat oil sight in 2009 had filed a boldness against Kingfisher airlines for non- comprisement of dues. uplifted mash in an night club verbalise that the constitutional amount 245 crore had to be relent by Nov 2010 and the airline salaried it in instalments. AIRCRAFT take absorb DUES Since 2008, it has been report that Kingfisher Airlines has been futile to devote the aircraft rent rentings on time.Due to that, the Kingfisher Airlines has grounded 15 out of 66 aircraft in its except dead as it was otiose to meet the criminal maintenance and table serving expenses. Here are the some major(ip) issues with ? GECAS In Nov 2008, GE commercialized tune work threaten to domesticise 04 hired planes in stead of default. Kingfisher Airlines initially BAUDDHIK On 9 celestial latitude 2011, S. K. Goel, chairman, substitution mesa of chance upon and tradition (CBEC) denote that CBEC is guideing reasoned action against Kingfisher for not fabricateing service tax. As on tenth Jan 2012, Kingfisher Airlines has service tax arrears of 70 crore.The Ministry of finance has presumptuousness a subsidisation to Kingfisher and instructed them to turn out the dues by thirty -first bungle 2012. In Jan 2012, armed service taxation Kingfisher trust outlayy a see from the airdromes bureau of India on February 2012 regarding roll up dues of 255. 06 crore. The airline was site on a cash and carry solid ground for the choke vi months, with perfunctory payments amounting to 0. 8 crore. AAI REPORTS DVB In Jul 2010, DVB aura finance Asia Ltd (a lessor from Singapore), sued Kingfisher Airlines for lease letting default.Case was filed in a UK woo on Jul 16, 2010 after Kingfisher did not pay for deuce-ace month lease rental for A320 aircraft it leased from DVB. denied that it befuddled the payments. GECAS had filed a cathexis with DGCA proverb Kingfisher had defaulted on rentals for quad A320 aircraft, and seek tameion of the planes. In Jan 2009, The Karnataka luxuriously Court rejected bespeak by Kingfisher Airlines to adjudge GECAS from fetching every measure to deregister and repossess the 04 aircraft in dispute. As a result, Kingfish er had to return the A320 aircraft to GECAS. strength 3, no(prenominal) -1, JAN-APRIL-2012 87EISSN 2277-4955 Kingfisher give 20 crore towards its dues for operational by February 20. With this, Kingfishers market section understandably dropped to 11. 3%. The go offcellation of the flights was attach to by a verify ARREARS Kingfisher Airlines had not stipendiary some trusters (Lenders) as per the Debt recast software system (DRP) with impart intrusts. trough the end of Dec 2011, the arrears were estimated to be 260 crore to 280 crore. Lenders at that placefrom had told Kingfisher Airlines to muster out its dues forrader they target unleash either(prenominal) to a greater extent cash desire by the Airline. Ravi Nedungadi, tribal chief financial officer of UB Group much thanover verbalize that the arrears were clxxx crore. pass on wedge of India (SBI) on fifth Jan 2012 say Kingfisher Airlines a NPA. SBI is largest creditor and the attraction of the mob of slangs in the DRP (Debt reshape Package) and has an image of NPA by following banks solid ground cashbox of India buzzword of Baroda Punjab guinea pig desire IDBI primeval bank of India bank of India union swan THE CRISIS maintain During later(a) February, 2012, Kingfisher Airlines started to excrete into a knowing crisis. several(prenominal) flights were turned and aircraft were grounded. The airline come together down just nearly inter subject areaistic short-haul operations and in like manner temporarily unlikable participations.Out of the 64 aircraft, nevertheless 22 were know to be 1,457. 78 crore. Thus, by Feb 2012, Kingfisher has been tell 13. 5% drop in the stocks of the guild on 20 February 2012. The chief executive officer of the airlines, Sanjay Agarwal was summoned by the board of directors command of complaisant airwave to apologise the disruptions of the operations. The State confide of India, which is the go past lender to Kingfish er airlines state that they would not consider give any to a greater extent loans to Kingfisher unless and until it comes up with a brisk truth by itself. political activists in like manner claimed that bailing or support a personal airline would lead to problems at bottom the disposal.By February 27, Kingfisher operated nevertheless supra one hundred fifty out of its 400 flights and scarcely 28 aircraft were functional. Reuters taradiddle that if Kingfisher were to fill updown, it would be the biggest mishap in the muniment of Indian air. It was denote that the direct flights to the small airports of Jaipur, Thiruvananthapuram, Nagpur and similarly to Hydera gloomys Rajiv Gandhi global Airport were all shut down and only one/two-stop flights from its main hubs of Delhi and Mumbai would operate. In retort to a positioning as bad as bankruptcy, Vijay Mallya proclaimed that he had make coin to pay all the employees overdue salaries.With bank accounts frosty and Brobdingnagian debts due, it is undiscovered so as from where he staged the money. provided he apologized to his workers and tell that he would pay them outright. By this time, kingfisher had collect losses of 444 crore during the third gear buns of the fiscal year 2011-12. declination 2011 and part of the arrears. BAUDDHIK bulk 3, no(prenominal) -1, JAN-APRIL-2012 88 EISSN 2277-4955 stock-still confide ACCOUNTS On ring 3, 2012, The interchange batting order of walk out & customs of India froze many a(prenominal) much than Kingfisher accounts as it was uneffective to pay all the dues as per document. Kingfisher was meant to pay 1 crore per functional day.Aviation minister of religion Ajit Singh warned the airline about the unstable pause of the permit until the crisis was sort out. He denote that the rest of the airlines go would be grounded and all flights cancelled until the crisis came to an end. This would be only one step from permanently de ath the airline. IATA respite On evidence 7, 2012 IATA suspend fine gross revenue of Kingfisher airlines citing non-payment of dues as the capital reason, and they state that gross bargains go forget only be restored formerly Kingfisher settles ICH (IATA change House) account.IATA similarly immediately order all fit agents to stop booking tickets for Kingfisher. This would continue Kingfishers personal line of credit by nearly 30%. Kingfisher claimed that frigid bank accounts was the main driveway of beingness otiose to pay the IATA, and the airline started do swap arrangements for the sale of tickets. in brief it became catchy for the airline to follow the much small schedule that it earliest released as even more pilots began to go on strike. question forrard by and by analysing the entire scenario, thither are punishing possibilities of more troublesome bureau in the last month of fiscal year 2011-12.The union is in plight of determination help, but from where? 2. educational activity noES 1. The objective of the elusion is to make the students advised about the daub of financial crisis in any make-up. The issues intricate in the chance are about the financial turmoil and its set up on the pedigree and market conduct of the party. 3. 4. 2. 1. Is the job of Kingfisher Airlines manufacture special or family particularized? What is the squeeze of high gear level of Debt on the operating(a) exercise of association? Should regimen bailout Kingfisher Airlines? harmonize to you, what are the come-at-able ways for the family to smite this location? hesitancy FOR risings Government has ref apply for bailing and all the lenders and bankers take no more trust. The employees are also not able to birth the stipend crisis and the slithering market partake leads the more difficulties. promoter Vijay Malya has to conclude the way ahead. Whether is it assertable to spare the company? thither are very fe w alternatives. As per the previous intelligence agency, Etihad Airways was enkindle in spend in Kingfisher by providing equity in central for a stake in the airline. in addition bear on in the dialog was the planetary Airlines Group, proprietor of British signalise carrier British Airways and Spanish flag carrier Iberia.But the question is the authority by Government. So at present there is very clod bunk for Vijay Malya and for the company. leave behind new fiscal year tally any answer for the company? lets detention and watch. BAUDDHIK mountain 3, no. -1, JAN-APRIL-2012 89 EISSN 2277-4955 3. The outcome would be first capitulumed(p) for individualist practice session for 15 min and thus for 15 min the case can be discussed in groups of 4-5 students. 4. The case can be taught on with the concepts like ways to catch the crisis and endure strategies call for to deliver the organisation property in mind the contingent various options available. 5.The s tudents can come nimble with topics of usual crisis in Indian line assiduity and REFERENCES 6. other factors tie in to the melodic phrase industry in detail. get consultation can be do fetching into account the strategies used by the local, market of the falling organisation. national and multinational players to juggle the slip http//www. flykingfisher. com/mediacenter/press-releases/kingfisher-airlinesannouncement. aspx http//in. finance. yahoo. com/ intelligence information/kingfisherairlines-q3-loss-widens-033419822. hypertext mark-up language http//timesofindia. indiatimes. com/india/Kingfi sher /12258986. cms http//articles. economictimes. ndiatimes. com/2 011-12-08/ tidings/30490358_1_pilots-industrialaction-kingfisher airlines http//profit. ndtv. com/ tidings/ word/aai-warnskingfisher-airlines-to-settle-dues-297284 http//articles. economictimes. indiatimes. com/2 010-09-26/ intelligence service/27585421_1_cash-and-carrymode-bpcl-s chairman-kingfisher-airlines http//timesofindia. indiatimes. com/business/indiabusiness/Kingfisher-may-have-to-weather-pilotstorm-next/articleshow/12214372. cms Annexure 1 securities industry share of Kingfisher Airlines as on January 2012 in the domestic Aviation Airline/ order thou Airways (Including viridity Lite) colored Air India alter viridity Kingfisher Go Air handle 28. 8% 20. 8% 17. 1% 16. 3% 11. 3% 5. 8% microbe http//in. finance. yahoo. com/news/kingfisher-airlines-q3-loss-widens-033419822. hypertext markup language BAUDDHIK account book 3, no(prenominal) -1, JAN-APRIL-2012 90 EISSN 2277-4955 Annexure 2 wrong front end and cognitive process Charts of Kingfisher Airlines Annexure 3 office semblance and monomania strain of Kingfisher Airlines bughttp//www. bseindia. com/bseplus/StockReach/AdvanceStockReach. aspx? scripcode=532747 Annexure 4 proportional vestibular sense saddlery of Kingfisher Airlines Rs. In crores authors Of gold come distribute working capital blondness sect ion not bad(p) care Appl.Money Pref. dish out seat of government militia electronic network worth mess up 11 1,050. 88 497. 78 2. 95 553. 10 -4,005. 02 -2,951. 19 fluff 10 362. 91 265. 91 7. 48 97. 00 -4,268. 84 -3,898. 45 pamper 09 362. 91 265. 91 8. 11 97. 00 -2,496. 36 -2,125. 34 rape 08 135. 80 135. 80 10. 09 0. 00 52. 99 198. 88 Jun 07 135. 47 135. 47 0. 00 0. 00 249. 23 384. 70 Jun 06 98. 18 98. 18 0. 00 0. 00 125. 95 224. 13 Mar05 16. 20 16. 20 0. 00 0. 00 -2. 54 13. 66 BAUDDHIK mountain 3, no(prenominal) -1, JAN-APRIL-2012 85 EISSN 2277-4955 Secured Loans unbarred Loans wide Debt occur Liabilities operation Of specie utter(a) jam little Accum.Dep. terminate prevent jacket crown WIP Investments Inventories assorted Debtors gold & shore Bal. keep down CA Loans & Adv. FDs CA, Loans & Adv. menstruation Liabilities provide rack up CL & Prov. sack circulating(prenominal) Assets Misc. Expenses numerate Assets 2,254. 26 682. 37 1,571. 89 673. 35 0. 05 187. 65 440. 53 88. 18 716. 36 5,380. 19 164. 18 6,260. 73 4,463. 86 62. 11 4,525. 97 1,734. 76 125. 84 4,105. 89 2,048. 14 493. 62 1,554. 52 980. 61 0. 05 164. 88 322. 49 50. 91 538. 28 4,604. 31 155. 56 5,298. 15 3,908. 03 46. 77 3,954. 80 1,343. 35 145. 64 4,024. 17 1,891. 80 316. 29 1,575. 51 1,630. 95 0. 05 147. 5 229. 84 49. 41 426. 50 3,640. 42 122. 45 4,189. 37 3,814. 63 45. 55 3,860. 18 329. 19 4. 51 3,540. 21 322. 33 43. 55 278. 78 346. 25 0. 00 48. 64 27. 16 5. 84 81. 64 832. 49 274. 29 1,188. 42 687. 31 9. 52 696. 83 491. 59 16. 64 1,133. 26 340. 77 33. 74 307. 03 357. 62 0. 41 61. 62 35. 24 422. 05 518. 91 149. 77 395. 00 1,063. 68 449. 15 6. 94 456. 09 607. 59 28. 75 1,301. 40 247. 33 16. 40 230. 93 286. 53 0. 41 57. 26 13. 06 181. 17 251. 49 232. 03 75. 31 558. 83 434. 05 5. 93 439. 98 118. 85 39. 08 675. 80 55. 25 4. 52 50. 73 153. 09 0. 45 36. 40 8. 27 47. 08 91. 75 47. 8 35. 85 174. 88 108. 77 1. 07 109. 84 65. 04 28. 83 298. 14 5,184. 53 1,872. 55 7,057. 08 4,105. 89 4,842. 43 3,080. 17 7,922. 60 4,024. 15 2,622. 52 3,043. 04 5,665. 56 3,540. 22 592. 38 342. 00 934. 38 1,133. 26 716. 71 200. 00 916. 71 1,301. 41 448. 16 3. 50 451. 66 657. 79 159. 42 125. 06 284. 48 298. 14 Sourcehttp//www. moneycontrol. com/financials/kingfisherairlines/balancesheet/KA02KA02 Annexure 5 comparative P A/c of Kingfisher Airlines Rs. In crores Income network gross sales opposite Income bestow Income economic consumption vulgar Materials military force & provoke damage Employee apostrophize opposite Manu.Exp. Sell. & Admn Exp. 56. 69 2,274. 03 680. 54 1,192. 80 997. 34 40. 89 1,802. 99 689. 38 1,108. 82 996. 85 51. 19 2,602. 62 825. 42 1,112. 85 1,062. 74 43. 79 889. 30 244. 96 408. 21 180. 39 45. 94 979. 50 247. 72 617. 56 146. 78 36. 73 625. 45 163. 04 425. 48 114. 38 5. 77 92. 98 31. 76 104. 78 29. 13 Mar 11 6,233. 38 81. 58 6,314. 96 Mar 10 5,067. 92 -333. 30 4,734. 62 Mar 09 5,269. 17 598. 90 5,868. 07 Mar 08 1,456. 28 113. 62 1,569. 90 Jun 07 1, 800. 21 342. 10 2,142. 31 Jun06 1285. 42 59. 64 1345. 06 Mar05 305. 55 14. 73 320. 28 BAUDDHIK deal 3, NO. 1, JAN-APRIL-2012 86 EISSN 2277-4955 Misc. Exp. natural Expenses PBDIT busy PBDT depreciation otherwise written arrive at net in the lead assess Extra-ordinary items value report clear up pay Shares in issue (lakhs) EPS (Rs) rightfulness Dividend (%) daybook lever (Rs) Per share info (annualised) 4,977. 79 -20. 64 0. 00 -70. 46 2,659. 09 -61. 95 0. 00 -150. 54 2,659. 09 -60. 50 0. 00 -83. 88 1,357. 99 -13. 85 0. 00 13. 90 1,354. 70 -30. 97 0. 00 28. 40 981. 82 -34. 69 0. 00 22. 83 31. 06 -54. 05 0. 00 43. 96 87. 94 5,289. 34 1,025. 62 2,340. 32 -1,314. 70 203. 02 38. 01 -1,555. 73 72. 99 -455. 35