Kingfisher air hoses started out as a UB group subsidy. a USD 2 billion diversified pudding stone. which holds more than 60 companies under it which are associated with major industries. The United Breweries group owned the kingfisher air hoses. Kingfisher air hoses had so commenced its commercial operations in the twelvemonth 2005 on the 9th of May. Operating with a fleet of four new Airbus A320-200’s. kingfisher air hoses had its first travel from Mumbai to Delhi. Subsequently the airliner had even commenced its international manoeuvres on the 3rd of September 2008. by complecting Bangalore and London. However it faced a worsening economic scenario since 2008. The mighty air hoses in the present twenty-four hours scenario is confronting many bankruptcy jobs. forcing the air hose to anchor many of its finishs and aircrafts.
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It was the twelvemonth 2006. when kingfisher air hoses got listed in the stock exchange after it had been setup in the twelvemonth 2003. The present twenty-four hours state of affairs for KFA is that it has a astonishing Rs. 8200 Crore debt and the money to pay for fuel. wages and airdrome fees etc. is running out. Due to this KFA has lost all its hopes and has pleaded the authorities to give them a entire bailout but harmonizing to market analysts. the existent defects in KFA’s concern programs and the operation are due to the endless sufferings of it. which is the major root job of the air hose. So my research inquiry for the current commentary would be “Will kingfisher air hoses be able to retrieve from the present debt crisis utilizing the current fiscal schemes? ”
Syllabus country covered:
Current Ratio Analysis
GPM and NPM ratios – Analysis of the balance sheet
When Deccan Aviation’s Captain G. R Gopinath was looking frontward to selling off his air hose. so is when Vijay Mallya who kept denying that he couldn’t even think of purchasing an air hose whose concern theoretical account is so different than that of his had all of a sudden put in his command and seemingly clinched the trade. It was an interesting trade because KFA had got the licence to wing instantly and got immediate listing every bit shortly as it purchased Deccan Aviation but it was non all good. along with the dainties they had even acquired the losingss incurred by the air hose.
The booster group of the air hose that is the UB Group had an experient set of functionaries to run its concern which majorly includes Vijay Mallya himself. The Airliner’s 2nd job was that its president was moving like an absentee landlord and was concentrating on his other concern. The 3rd error that Kingfisher Airlines had made was that they could hold foremost consolidated its domestic operations and so got into international winging as so the competition increases a batch and merely those with tremendous money resources survive.
Strong trade name image
Fiscal support from the booster that is the UB group.
First Indian bearer that started out with a whole new fleet of planes. Quality service and invention
Fiscal issues due to heavy debt adoption
The puting off of employees has caused a bad image.
The care costs were really high at land and air hose degree. The company still has non met its breakeven.
The ticket pricing was really high. non in the low-cost scope of the common mans unlike its rivals which are priced economically.
Poor service of air India and jobs of work stoppages in jet air passages. Growth in air travel. the figure of riders has increased. Route Rationalization: cutting down concern in unprofitable sectors and services to metropoliss. 1 Debt Recast: Kingfisher Airlines must inquire the Bankss to cut down the involvement rates of the loans and perchance happen a local investor to put some money in their business2. Low cost bearers obtaining the larger market portion.
Fuel costs besides have increased later.
Banks will allege on terrible security before giving in any more loans which they need for their operational costs. Some Bankss may even travel up to the extent of naming in all their debt. The airline’s booster financess will be tapped. which will set force per unit area on the fundss of the UB group
Current Ratio Analysis:
It can be defined as the company’s ability to run into its short term maturating duties. The current ratio is calculated utilizing this expression: Current Assets/Current Liabilities. For the twelvemonth 2012 ( as of March 31st ) = 16188. 35/84428. 04 = 0. 19 ( all values in million INR ) For the twelvemonth 2011 ( as of March 31st ) = 29738. 26/55255. 85 = 0. 54 ( all values in million INR ) 3 hypertext transfer protocol: //www. marketing91. com/swot-kingfisher-airlines/
4 hypertext transfer protocol: //m. outlookindia. com/story. aspx? sid=4 & A ; aid=279017
It can be seen that the current ratio has decreased from the twelvemonth 2011 to 2012 which indicates a menace to the company as the debt to assets has significantly increased and has non yet been repaid in the right theoretical account to better and come out of the debt crisis.
Following is a graph that shows the plotting based on the balance sheet3. We can see that the current ratio is less than 1:1 for both the old ages which indicates that the short term debts of the concern are much greater than its liquid assets. which could spell catastrophe for its endurance if creditors demand payment. Which is the instance for kingfisher air hoses as there crisis has been increasing and increasing as there are no beginnings for gross that can be used to pay out even a portion of the debt. If the company’s current ratio falls below 1. it implies that the company has a negative on the job capital. it is so required for the concern to take a closer expression at the concern and there are no liquidness issues.
If the ratio is drastically below 1 it implies that the company has stock lists that can be converted into hard currency and this involves to be earnestly concerned into the working which when neglected can take to a fiscal crisis like in the instance of Kingfisher Airlines. When observed in the fiscal values the income from operations has increased drastically from March 31st 2011 to process 31st 2012 which can be accounted to the loss in operations and trade. If we observe the employee costs besides have been cut down on a big note due to the puting off of the employees and staff members. The aircraft rental lease has been subsidized as the fleet of Kingfisher air hoses has decreased.
If we compare the quarters between December 31st 2011 and march 31st 2012. we can see that the aircraft fuel disbursals are more or less the same. which shows a loophole as to why is at that place still such high fuel disbursals even though the operations and fleet have been reduced or more close to being closed. The losingss between the same periods have about increased more than double the times. Hence we see the net losingss of the company to increase from ( 44. 426. 95 ) to ( 115. 152. 60 ) lacs which shows the turning debt crisis of Kingfisher Airlines.
Price Movement and Performance Charts of Kingfisher Airlines
Index Comparison and Ownership Pattern of Kingfisher Airlines
Beginning: hypertext transfer protocol: //www. bseindia. com/bseplus/StockReach/AdvanceStockReach. aspx? scrip
From the above graphs. it can be clearly seen of what the yesteryear. nowadays and future tendency of Kingfisher Airlines is traveling to look like in the several countries mentioned above.
GPM ( Gross net income border )
For the twelvemonth 2011
-4. 8 %
For the twelvemonth 2012
38. 2 %
It can be seen that the gross net income has been deprecating at an exponential rate which shows that there is perfectly no range of concern for kingfisher air hoses. as its operation and gross revenues have gone down on a drastic rate. therefore taking to its climb losingss. NPM ( Net Profit Margin )
For the twelvemonth 2011
21. 1 %
For the twelvemonth 2012
382. 01 %
When we calculate the net net income for the company we can detect the alteration in it from the twelvemonth 2011 and 2012 there is difference of approximately 360 % which shows the outrageousness of the debt that kingfisher air hoses is heading towards. The company’s market portion has besides shrunk a batch due to the onboard crisis. Below is the pictural representation of the difference in the market portion of kingfisher air hoses between the fiscal twelvemonth 2011 and 2012.
FOR THE Year 2011
FOR THE Year 2012
It can be seen that Kingfisher Airlines has gone for public issue before it obtained Deccan Airlines so a portion of the money might hold been raised from /the money gained out of it. The UB group was the booster of the company so it had the maximal interest in the Airlines but recently due to the debt crisis its interest is being diluted in order to publish them to other public who can put money and might raise some capital for the concern. making so it is raising fiscal force per unit area on the UB Group. The Traveling concern position of kingfisher air hoses has already been lost which might present a menace for investors puting in the company which might take to really black opportunities of endurance.
Kingfisher Airlines had been a nonpayer of fuel measures which lead to many jobs for the airliner. HPCL ( Hindustan Petroleum Corporation Limited ) had abridged the supplies of fuel for the airliner in stead of non-payment of delinquent fuel measures. Delayed Salary: Kingfisher Airlines had non paid wages to its employees from October 2011 to January 2012. which had caused employee dissatisfaction. It had besides been noted that the revenue enhancement cut from the employee’s income at the beginning was besides defaulted while paying to the revenue enhancement section. There was a hold in the aircraft rental leases which has to be paid to GE Commercial Aviation Services. which subsequently lead to repossession of four A320 aircrafts.
Airport Authority of India had slammed notices on kingfisher for a due on measures which amounted to about 255. 06 crore INR. This had happened because the airliner was working on a hard currency and carry footing with a day-to-day disbursal of 0. 8 crore INR. Kingfisher Airlines had even service revenue enhancement arrears which invited the possibility of legal action against the airliner. Kingfisher Airlines was declared as a Non Performing Asset ( NPA ) by the Bankss that had lent money for the airliner to transport out its concern. Later. KFA suffered more jobs such as eroding of net worth. frozen bank histories. much of its fleet being grounded and suspension of ticket gross revenues by International Air Transport Association ( IATA ) .
Kingfisher Airlines portion monetary value from Sep-2010 to Sep-2011
One universe confederation rank would let KFA to hold incoming inland rider growing. Co-branded Credit Cards – Kingfisher Airlines had issues the King Club ICICI co-brand card as ICICI bank is one of its major loaners. Kingfisher Express: DTD ( Door to Door ) Cargo express services to capture the under penetrated air-cargo bringing service. Cost Reduction ingeniousness
Streamlining distribution channels.
Renegociating seller understandings – airdrome and fuel price reductions. operating rentals at a price reduction. Control over discretional spend – decrease in leases. cost of conveyance. local conveyance and communicating. Optimize infinite. Operational efficiency: economy on fuel ingestion.
Capitalization of its disbursals which would take to the addition in the net income. cut down the shareholder equity and entire assets will upsurge for the same sum of disbursals.
Schemes for Kingfisher to come out from its Debt Crisis: Rescheduling and restructuring of loans- the unbarred loans must be converted into equity portion capital so Kingfisher Airlines can avoid the finance cost of the unbarred part but the promoter’s ( UB Group ) keeping will drastically diminish and even the secured loans can be paid in about the same mode. Thus the Bankss will hold to increase the period of refund and diminish the rate of involvement on the loans which might assist KFA’s operations and perchance the loans might be cleared. There must be efficient schemes to increase the turnover of the company which includes the alteration in pricing scheme and doing it competitory to its co-airlines.
Fuel subsidies from the authorities – KFA must convert the authorities to give them fuel subsidies by which they can run their air hoses and so easy refund back all its debts. FDI ( Foreign Direct Investment ) – there is a larger opportunity of KFA acquiring merged with some international air hose if the FDI bound is increased which will therefore take to the acquisition of Kingfisher Airlines by an international bearer but will be relieved of its debts and would non so consequence the booster group.
The present status of Kingfisher Airlines can be due to a series of grounds but finally it was a rise and all of a elephantine domestic bearer for India. There are really few opportunities for the company to bail out from its current state of affairs. The hope of an international amalgamation with Kingfisher might give a beam of hope to the endurance of the air hoses. If the current debt crisis is non put on clasp and keeps increasing. there would be merely one door unfastened for Kingfisher Airlines that is to sell out everything to refund all its debts to Bankss and loaners therefore taking to the ultimate prostration of Kingfisher Airlines.