Crisis of Kingfisher Airlines Essay

The Indian circularise commercialize is estimated to be the ordinal largest in the world but with the creation size the country has, the Indian political science believes it will perish the worlds third largest market by 2020. 87 foreign and cinque Indian flight paths aerify to and from India to 40 countries. Approximately five jillion Indians fly every calendar month domestic helpally. municipal traffic much than doubled betwixt Jul-2006 and July 2011, with developing of 101%. One reason for the growth was the deregulation of Indian domestic aviation in 2003- 2004 followed by planetary deregulation in 2007-2008India has three salutary service skyways cinch India, honey oil pass aroundways, Kingfisher ventlines and quaternity Low damage common flattops Go oxygenate, IndiGo, JetLite (owned by Jet airways), and SpiceJet. Kingfisher also had a discount mutation Kingfisher Red known formerly as Simplifly Deccan and before that walkover Deccan.Ironically the In dian aviation despite a market growing at 18 per penny for last 11 months, five go forth of six Indian airlines are bleed tip to the failure of one of the leading aviation player Kingfisher walkoverlines.Kingfisher Airlines, a infantryman of UB Group (United Breweries Holdings Ltd), founded in whitethorn 2005 operates a passenger airline in India. It was the scratch airline in India to provide gift first class service on domestic routes with all new aircraft. In May 2007, it announced it would acquire a 26% stake in Air Deccan, a low comprise carrier (LCC) for 5.5 billion rupees ($135 million). Kingfisher Airlines Limited came to become one of the countrys largest airlines, direct(a) more than cd public lifes a sidereal day and having a wide ne iirk of destinations, with regional and long-haul internationalistic services touching approximately 60 destinations.At one rate the Kingfisher Airlines had the second largest make do in Indias domestic air choke market. ev en due to the severe financial crisis go about by the airline, it has the fifth largest market share currently. Even the bon ton have no funds to pay the salaries to the employees and is facing several(prenominal) other issues like fuel dues aircraft subscribe rental dues, service tax dues and slang arrears.As Kingfisher airlines is in the midst of a financial turmoil, the case will indicate to understand the various factors which are fuelling the growth / decline and those which are/will be critical for the companys process in the near term.Introduction floor of the Indian Airline IndustryIn December 1912, the first domestic air route was opened between Delhi and Karachi by the Indian State Air run (in collaboration with Imperial Airways of the UK). This marked a new beginning in India. three long magazine later, Tata Sons started a regular send service between Karachi and Madras. At that time, at that place were a few transport companies direct within and also beyond t he frontiers of the country, carrying both(prenominal) air cargo and passengers. Some of these were Tata Airlines, Indian National Airways, Air Service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways. The Tata Airlines was born-again into a public limited company in the year 1946 and renamed Air India Limited. In 1948 a joint vault of heaven company-Air India foreign was established by the Government of India and Air India headed by J.R.D. Tata. In 1953, the Parliament passed the Air Corporation Act. Air India International and Indian Airlines Corporation came into formal existence and Air India International was nationalized.The Indian Aviation sector was liberalized in commence in 1990 with hidden sector players being allowed to operate as air taxi operators in India. A number of private players commenced domestic trading operations like Damania, East-West, Modiluft, Air Sahara and NEPC, entered the industry. However, a decade later none of them have survived. foreword of Kingfisher AirlinesKingfisher Airlines is an airline group based in India. Its head office is The Qube in Andheri (East), Mumbai and Registered portion in UB City, Bangalore. Kingfisher Airlines was established in 2003 and began operations on 9 May 2005 with a fleet of five A380s, five Airbus A350s aircraft and five Airbus A330s operating its first inaugural flight from Mumbai to Delhi. It seems staggering that an airline a month old could order the worlds biggest plane in an untested market. They went international in 2008, less than quaternity years ago. In May 2009, they became Indias largest airline by passenger numbers.Owned by the Bangalore based United Breweries Group. Kingfisher Airlines, through its reboot company United Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red. The UB group is lead by Dr. Vijay Mallya as the lead to one of Indias largest conglomerates with respective(a) interests in brewing, distilling, real estate , engineering, fertilizers, bio engine room, information technology and aviation. Dr. Mallya, was elected by shareholders as moderate of The UB Group in 1983, at the bestride of 28 and has been instrumental in growing it into a multinational business conglomerate. Kingfisher is the lone(prenominal) Indian and the one of the six in the world to have received the 6 stars rating for its services by the Skytrax operates more than 400 flights a day connecting 72 destinations the world over.Merger of Kingfisher- Air DeccanA wholly owned subsidiary of Deccan Aviation, Air Deccan, was Indias first low cost carrier. It has a vision to enable every Indian to fly thus representing the airlines simple and no frills approach. With a low pricing strategy, Air Deccan earlier focussed on first time travellers and successfully shifted people from Rail travel to Air travel.Air Deccan airlines merged with Kingfisher Airlines and firm to operate as a wiz entity from April, 2008 under the title n ame Kingfisher Aviation. The jointure is based on recommendations of Accenture, the global consulting firm. KPMG was asked to do the valuation and the swap ratio was decided accordingly. The merger came through on as Vijay Mallya from Kingfisher airlines bought 26% of the stake in Air Deccan. The unification of the two carriers had to be clear not only by the two panels, but also by the institutional investors, independent directors, and other shareholders. Air Deccan had four independent directors-which included prominent persons like IIM Prof Thiru Naraya, Tennis player Vijay Amritraj, and A K Ganguly, Former MD Nabisco Malaysia. contribute merger, KingFisher would operate as a iodine largest (private) airline in the sub-continent with a feature fleet of 71 aircrafts, connects 70 destinations and operating 550 flights in a day. The combined entity has a market share of 33%. master key Gopinath continued as the Executive Chairman and Vijay Malay in-charge as the Vice Chairman .To justify the fleet structure, Kingfisher was focussed towards the international routes and carrying out as a full-service carrier succession Air Deccan was allotted the wider domestic slip by and operated as a low cost carrier.As both the carriers operated the Airbus, the operational synergies integrate not only the centering and ply of the airlines but also the engineering, inventory management and ground handling services, maintenance and transcend sectors. These efforts brought about an increased savings in costs by 4-5% (INR. 300 crores)*Further, by devising a more optimal routing strategy it could help in rationalizing the fares. in advance the merger Air Deccan recorded a net loss of Rs 213.17 crores on revenue enhancement of Rs 437.82 crores for 2006-07. The company had also raised Rs 400 crores through an IPO in May 2006. The merger will create a more competitive business in scale and scope to emerge as market leader.