DOWNFALL OF
KINGFISHER
AIRLINES
FAILURE OF A COMPANY
Not able to generate a profit over all the investments and
Do not have enough resources to continue production and sell their products.
WHY DO COMPANIES FAIL?
The main factors that lead to such failure are :
Unsuccessful marketing strategies.
Poor analysis of demand and psychology of consumers.
Ineffectiveness in qualitative measures of product and company
Poor leadership skills and inadequate management.
Lack of funding and inability to acquire funds.
Unethical practices in businesses.
KINGFISHER AIRLINES
ABOUT THE COMPANY
Established in 2003, by United Breweries Holdings Ltd.
Founded by Mr. Vijay Mallya, liquor tycoon of India
Vision-” The Kingfisher Airlines family will consistently deliver a
safe, value-based and enjoyable travel experience to all our guests”.
Started commercial operations in 2005 and international operations in 2008
Issued an initial public offering in May 2005, with an IPO size value of Rs. 363.3
Cr., to raise money for the company.
NEW PLAYER IN THE MARKET
Started commercial operations with four brand new Airbus A320-200 airplanes, operating
from Mumbai to Delhi.
Three classes of travel were offered:
1.Kingfisher First
2.Kingfisher Class
3.Kingfisher Red
Received a five star rating from Skytrax in 2009, became the largest airline in India.
Became largest airline with 26.7% share in the aviation market.
Kingfisher Airbus A320-200
How Mallya’s bird fell sick
It started its operations at a time when the aviation industry in India
was suffering heavily, with almost all the players in loss and heavy
debt.
Reasons for these losses where :
1)Economic slowdown in 2008
2)The airline’s mandatory policy to fly non-profitable routes.
3)Compromise in Safety functions due to financial stress.
4) High airport fees, fuel prices and taxation on fuel.
1. HIGH COST OF OPERATION AND TAXATION OF
FUEL.
Hike in Airport Fees.
Inflation increased Fuel prices.
Airline taxes and fuel taxes also increased.
KFA could not pay the fuel bills.
KFA tried to cut costs in different.
By this time, KFA was knee deep in enormous amounts of debts with
high interest rates.
2. FUEL TO THE FIRE:
KINGFISHER RED AND ACQUISITION OF AIR DECCAN
KFA acquired the failing low cost domestic carrier Air Deccan
VIJAY MALLYA WITH FOUNDER OF AIR DECCAN AIR DECCAN ATR-42 SERIES G.R. GOPINATH
KINGFISHER RED AIRBUS A321-200 series air crafts
KFA was meant to be a low cost carrier.
KFA was incurring a loss of Rs.1000 Cr. for three consecutive years.
KFA increased the prices of tickets to reduce losses.
In December 2011, the Income tax department froze the bank accounts of KFA.
4. ISSUES IN STRATEGY APPROACH
Failed to make proper decisions
By 2011, KFA were operating more than 350 flights
KFA could not afford the rental charges
Internal crisis as employees were not
being payed.
Cancellation of license by Directorate
General Of Civil Aviation( DGCA)
5. INEFFICIENT MANAGEMENT
Unstable Management
Lack of proper management
No serious intervention by Mr. Vijay Mallya
Inefficient and ineffective in handling
financial crisis
SHUTDOWN
On 20th of October 2012, Kingfisher Airlines suspended their operations. Its
licence was suspended by Directorate General of Civil Aviation, as it
questioned the feasibility of continuing the operations under high debt and
heavy scrutiny of its ability to pay it back to the banks.
The same year, KFA filed for bankruptcy.
Its Flying rights were scrapped in February 2013 by the ministry of aviation.
Nearly Rs. 400 Cr. worth of loans were declared as Non-performing loans in
July 2014.
In march 2016, State Bank of India led a consortium of 17 banks to recover
dues worth Rs.9000 Cr. owned by Vijay Mallya in different forms of assets.
FROM GOOD TIMES TO BANKRUPTCY : The Aftermath
• Mr. Vijay Mallya took loans from 17 banks.
Mr. Vijay Mallya fled the country.
Prevention of Money Laundering Act (PMLA).
Had to sell his stakes in sports ventures.
Mr Mallya was arrested.
THANK YOU
Presented by:- Saloni Mathur & Mohammad Bilal
PPT Prepared by:- Guruprasad, Pavan Rathod & Chandu
