Investor Presentation 05 January 2011
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Discussion Document
*
1* Updated 28 February 2011
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Agenda
n an acro- conom c an v a on n us ry u oo
Competitive Landscape
Kingfisher Airlines: Overview
4
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India is one of the fastest growing aviation markets in theworld
Indian Aviation traffic has grown at a CAGR of ~ 20% over the last 6 years (2.3 times GDP growth)
Various leading agencies have forecasted growth to continue over the next 15-20 years
CAPA Forecast
Airbus & Boeing predict that India will be the highest growth market in the world over the next 20
years, ahead of China
Centre for Asia Pacific Aviation CAPA ex ects domestic traffic to ex and at 14.8% CAGR throu h
5Source: DGCA, Research & analyst reports; Airbus Website, Boeing Website;CAPA Aviation Outlook Report
2020
* Based on average GDP growth of 8% & 2.0x multiplier and based on average GDP growth of 8% & 1.6x multiplier
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Current low air travel penetration & emerging marketconditions provide great potential for growth
Despite the growth, penetration in India is
amongst lowest in the world
Coupled with market conditions, this is
expected to ensure continued growth
Increasin GDP & er ca ita income
3.2
3
3.5
Indias GDP growth rate expected to be at 7-9%
Rapid emergence of large middle class
2.3
1
1.5
2
2.5 2025, with a 4 fold increase in spending power
Significant rise in working population & spend.
0.20.07
0
0.5
US UK Brazil China India
and working in the next 15 years
Increased urbanization
Seats deployed per capita
Favorable government Stance
Visible impact of aviation growth on GDP has led
6
Source: National Council of Agriculture & Economic Research, RBI, UN projections,Public sources, OAG 2008
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Massive infrastructure investment by the government tosupport the growth
20102004 2015(92 Airports )(45 Airports) (125+ airports)
\\
\\
The Vision 2020 statement announced by the Ministry of Civil Aviation, Government of India, envisages creating
infrastructure to handle 280 million passengers by 2020
New domestic airports added New domestic airports proposed
over the next five years
Over the next five years, investments in aviation infrastructure are expected to be over USD 9 billion
It is expected that this will further support the spread of traffic outside the top 6 cities, which today account for ~90% of
7Source: AAI
revenue
Delhi & Mumbai, which accounted for 85% of traffic few years back have already dropped to 60%
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Accelerating demand coupled with modest supply is expectedto keep the domestic aviation industry on a profitable trajectory
The traffic growth through FY2014/15 is forecasted at 16.7% per annum
The capacity growth through FY2014/15 is forecasted at 13.5% per annum
8Source: CAPA Aviation Outlook Report
No new airline licenses have been granted for several years at a national level
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Agenda
n an acro- conom c an v a on n us ry u oo
Competitive Landscape
Kingfisher Airlines: Overview
9
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The Indian competitive landscape has evolved withseveral new entrants over the last five years
Airline OwnershipAverage
age of fleet(Years)
Years OfOperation
AircraftDomesticRoutesWide
BodyNarrowBody
TurboProps
group(Airbus A320) (ATR)
NACIL > 7 67 32115
(Airbus A320 &
Boeing 737)
13*(ATR,CRJ,DO)
186
Jet Airways 5 17 15 53(Boeing 737)
14(ATR)
171
18 6.(Boeing 737) (CRJ)
Interglobe Aviation 2 4 28(Airbus A 320)
108
Sun Group 2.5 5 24(Boeing 737)
88
10
10
.(Airbus A 320)
Source: Airline website, DGCA and PAX-IS* Includes ATR and CRJ aircrafts registered under Airline Allied Services Limited
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KFA is the only major network carrier to have gained marketshare over these five years
Market Share Evolution
4%1%
12.4%
4%
Paramount
AI
27%
5.3%
14.3%
Indigo
Go AirS211%
7.4%
17.7%
Alliance Air
Air India
36%18.1%
Jetlite
Jet Airways
5%
23%12%Air Deccan
Kingfisher
KFA*
11Source: DGCA
-
25.2 Mn 45.3 MnMarket Size
* KFA share in FY10 includes Air Deccan post-merger
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Agenda
n an acro- conom c an v a on n us ry u oo
Competitive Landscape
Kingfisher Airlines: Overview
12
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KFA entered the Aviation Industry with a world class product& became the market leader in three years of operation
Deccan first
KFA airlines undertakes
integration into Deccan toKFA declares operating
Domestic recession
flight
Sep 2007
become Indias largest
domestic carrier
Jun 2010 Oct 2010
Half of FY11accelerates post 26/11
Sep 2008May 2005
August 2003
UB group
Aug 2008
KFA named one of 6 five star KFA invited to KFA debt recast
Dec 2008 Sep 2010
KFA first flight
acquiredcontrolling stake
in Air Deccan
airlines in the world
KFA Starts international
operations
ecome amember of
oneworld
alliance
Reserve Bank of
India
13
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Kingfisher Airlines Investment Highlights
Strong Parentage -UB Group
1
Indias FavoriteMulti-Product
25
KFA
Widest DomesticNetwork
Global Alliance &Loyalty Program
34
14
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1. UB Group has successfully created a leadership positionacross consumer businesses in India
other consumer company in India
UB Group has leveraged its understanding of the Indian consumer to successfully build brands
2nd largest spirits company in the world
across multiple consumer segments from mass market to premium
United Spirits Ltd.
No. 1 SpiritsCompany in India
arges sp r s company n n a
Market share in excess of 55% in first line brands
Key brands - Dalmore, Jura, Whyte & Mackay, Black Dog, Antiquity,Signature, Royal Challenge, McDowell's No.1, Romanov
Undisputed leader of the Indian beer industryUnited Breweries
Key brands - Kingfisher Blue, Kingfisher Premium, Kingfisher Ultra,Kingfisher Draught & London Pilsner
Ltd.No. 1 Beer
Company in India
15
UB Group has been a game changer in the spirits industry, working at the forefront
with key stakeholders to shape policy for the industry
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2. Kingfisher Airlines Indias most awarded airline
794Kingfisher
KFA has won more than 40 awards for its superiorquality and service
One of the 6 airlines in the world to receive SKYTRAX
Indias Favorite Airline
761
773
786
Indigo
Spicejet
Jet Airwaysin 2010
Best Airline Seat - Economy Class by SKYTRAXWorld Airline Awards in 2010
736
745
752
Air India
Jet Lite
Go Air Rated the Best Airline in Central Asia at the SKYTRAXWorld Airline Awards in 2009
India's top rated Domestic Airline- Full Service forKin fisher Airlines in 2009*
700 720 740 760 780 800
India's top rated Domestic Airline- Low Cost forKingfisher Red in 2009*
Indias favourite airline as per the recent HT-MARS
Note: Score on 1000, higher scores indicate greater satisfaction
Source: Hindustan Times MARS Consumer Satisfaction Survey
consumer survey in 2009Awarded for the best frequent flyer program
Best Program of the Year and Best Elite Program
16
the FTA awards 2010
Source: * by Economic Travel Awards
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3. Widest domestic reach
*
59 destinations*
333 flights a day* With 59 domestic destinations
to offer KFA has the widest
reach in India
leisure destinations in the
country covering > 98% of the
addressable passenger base
14 unique destinations not
serviced b an other airline
17
KFA serves more destinations than any other carrier in India
*As of 31stDec 2010
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- -
4. Global alliance & loyalty Program
oneworld is the worlds most profitable global alliance, bringing together the leading airline carriers -American Airlines, British Airways, Cathay Pacific, Qantas, Finnair
oneworld is a quality focused alliance that has been voted the best airline alliance for eight years in a row
oneworld serves 800 airports in 150 countries through 9,000 daily flights & is the only alliance with member
Joining hands with oneworld would generate significant opportunities for KFA
Entry into the alliance would generate revenue enhancement opportunities of upto 5%
The entry will enable KFA to fulfill global expansion plans in a focused manner with calibrated investments
oneworld is the best global alliance for KFA as provides for flexible membership structure with lowparticipation costs & control of own commercial strategy no interference with bilateral agreements withcarriers outside alliance
18
KFA integration with oneworld already underway; British Airways codeshare already commenced Implementation expected to be completed by December 2011
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5. Multi-product offering across price points
Business class category for high end business &
premium consumers
Only Indian airline to offer valet service
the Indian consumer
Kingfisher is a network carrier whichKF
Only Indian airline to offer stand up bar & lounge for
international passengers
different consumer segments India does not present significant cost
(3%)
Full service economy with in-flight entertainment
Best Airline Seat - Economy Class Passenger Choice
award by SKYTRAX World Airline Awards for 2010
KF
Class
the rest of the world
All carriers are point to point
Secondary airports do not exist
Only airline to offer in-flight entertainment across the
fleet
(22%) Labour costs are low
KFA has the flexibility to shift capacity
between services based on demand as
An all-economy variant aimed at value consciousconsumers
KFRed(75%)
demonstrated by a 30% move to
Kingfisher Red during the recession
With the resurgence of premium demand
19
in 2010, some of this capacity will be
moved back
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KFA is led by a very experienced aviation team
a rman anag ng
Director
Dr. Vijay Mallya
CEO
Sanjay Aggarwal
Sanjay was the CEO of SpiceJet in
India rior to oinin KFA. He wasresponsible for the successful
turnaround of the airline. He has 21years of experience in aviation &
hospitality
Currently leading
Operations &
Engineering
Hitesh PatelEVP
Rajesh heads Guest
In-Flight &
Services
Rajesh VermaEVP
Mr. A Raghunathan is a
Finance
A RaghunathanCFO
Manoj has over 18 years
Commercial
Manoj ChackoEVP
operations and
engineering at KingfisherAirlines, Mr. Patel hasover 27 years of work
experience in the airlineindustry
Services, In Flight
Services & Securityfunctions at KingfisherAirlines & has 18 years of
experience in the airlineand hospitality industries
qualified Chartered
Accountant with over 30years of work experiencein finance and accounts
of experience in Indian and
international airlines andtravel services
20
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Agenda
n an acro- conom c an v a on n us ry u oo
Competitive Landscape
Kingfisher Airlines: Overview
21
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The Kingfisher Turnaround Story
Kingfisher Airlines has become the largest airline in the Indian skies by number of routes ina short span of seven years (starting with Air Deccan in 2003 and subsequent integration oferstwhile Kingfisher with Air Deccan)
The pace of growth was accompanied by challenges for the company given the integrationof Deccan airlines, an astronomic rise in fuel prices & the economic slowdown
Given these challenges, the company did not deem it appropriate to raise capital over thelast 1-2 years
The economic environment is now buoyant with strong demand in the aviation industry
ng s er operat ons ave sta ze t roug var ous turnaroun n t at ves;margins have improved from -32.9% in FY09 to +4.5% in H1 FY11
22
e t recast as een approve , an equ ty n us on s now un erway av ng een approveby our shareholders
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Kingfisher Market Performance Domestic
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Kingfisher has consistently increased load factors since Q2FY09 & maintained a steady effective market share
Domestic
68%70%
72%
76% 74%
81% 82%
75%73%
80%
70%
75%
80%
Load Factor
54%
61%
66%
67%
61%
62%
65%
70%68%
55%
60%
65%
50%
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
KF LF% Industry LF% excluding KF
1.04
1.15
1.10
1.15
1.20
ec ve ar e s areMarket share/Capacity share
1.01
0.91
0.99 1.011.00 1.00 1.01 .
0.80
0.85
0.90
0.951.00
.
24Source: DGCANote: Market share/capacity share calculated on a RPKM/ASKM basis
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Despite a significant reduction in capacityDomestic
4,500
First mover to rationalizeindustry capacity post Deccan merger
Capacity
4,201
3,5983 534
4,000
Second round of capacity rationalization
to balance demand supply
Aircraft grounded due to technical
3,392
3,253
2,830 2,776
2,950
2,8613,000
3,500
AS
KM(mn)
2,3322,500
2,000
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
Aircraft utilization has been enhanced by > 10% to offset capacity loss due to grounded aircraft
25Source: DGCA
Current utilization of the Airbus A320 family stands at 12.2 hours & of the ATR family stands at 11.04
hours
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Kingfisher has shown a steady revenue growth over the lastfew years and has managed to outpace competition
Domestic
FY09 FY10 Q1 FY11 Q2 FY11
Pax RASK 3.27 3.61 4.26 4.13
YOY % 19% 10% 22% 25%
4.50
3.50
3.72
3.48
3.863.79
4.264.13
3.74
4.09 4.07
3.67 3.73
3.70
3.90
4.10
4.30
.
3.193.27 3.31
3.35
2.75
3.70.
3.23
2.70
2.90
3.10
3.30
3.50
2.50Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
KFA Jet+Jetlite
26Note: Jet+Jetlite data is provided in the investor reports on the websiteJet+Jetlite Pax Revenue = RRPK*RPK
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This growth has been driven by the preference for Kingfisherspremium product and its wide domestic network
*
Domestic
4.5
5.0
5.5
6.0Quarter-wise YoY growthpercentage
2.5
3.03.5
4.0 11%
The Kingfisher Full service product (~25% capacity) has seen strong YoY RASK growth with the economic recovery;First Class LF has increased by 9 percentage points in Q1 FY11 over Q1 FY10
Quarter-wise YoY growthpercentage
KFA Exclusive Routes: RASK
4.5
5.0
5.5
6.0
33%23%
34%
2.5
3.0
3.5
4.0
27Source: PaxIS October Schedule, KFA MIS
Kingfishers widest network has yielded results with exclusive routes (~10% capacity) growing at a fast pace
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
* KFA Full Service includes KFF and KFC
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leading to a significant improvement in operatingperformance
Domestic
4.004.68 4.975.00
6.00
Total RASK
.
-
1.00
2.00
3.00
.
INR
149 96200
400EBITDA
FY09 FY10 Q1FY11 Q2FY11
EBITDA CASK
(266)
(600)
(400)
(200)
-
FY09 FY10 Q1FY11 Q2FY11
s.
incrs
4.36
4.23
4.56
4.30
4.40
4.50
4.60
R(1,292)(1,400)
(1,200)
(1,000)
.
3.90
4.00
4.10
4.20
FY09 FY10 Q1FY11 Q2FY11
I
28
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As a result, Kingfisher has steadily bridged the financialperformance gap on domestic operations as compared to peers
All Figures in INRDomestic
1.61
1.60
1.70
ax on- ue
2.092.10
2.30
Pax RASK/Non-Fuel EBITDAR CASK**
1.29
1.25
1.29
1.51
1.33
1.30
1.40
.
1.64 1.621.70
1.511.60
1.84
1.641.50
1.70
.
1.21 1.22
1.10
.
FY09 FY10 Q1FY11 Q2FY11
KF Jet + Jetlite*
1.10
1.30
FY09 FY10 Q1FY11 Q2FY11
KF Jet + Jetlite*
KFA (Rs Cr) FY09 FY10 Q1 FY11 Q2 FY11
EBITDAR Margin -5% 13% 24% 24%
EBITDA Margin -25% -6% 11% 8%
Jet+Jetlite* (Rs Cr) FY09 FY10 Q1 FY11 Q2 FY11
EBITDAR Margin 2% 23% 21% 17%
EBITDA Margin -9% 5% 11% 6%
Pax RASK 3.27 3.61 4.26 4.13
Non-Fuel EBITDA CASK** 2.70 2.95 2.65 3.21
Non-Fuel EBITDAR CASK** 2.00 2.22 2.03 2.43
Pax RASK 3.89 3.38 3.73 3.23
Non-Fuel EBITDA CASK 3.10 2.62 2.47 2.42
Non-Fuel EBITDAR CASK 2.57 2.11 2.02 1.97
29**CASK adjusted to Lease impact of AOG for KFAEBITDAR & EBITDA margins calculated on Total Revenue for both carriers
KFA EBITDA margin for domestic operations in the current fiscal is higher than Jet+Jetlite (9.8% vs 8.5%)
*Source: Jet+Jetlite published financials
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The improvement has been driven by several revenue and costinitiatives, though slowed by unexpected aircraft grounding
*
Domestic
FY09 FY10 H1FY11
Pax and AncillaryRevenue
5,137 4,522 2,362
-4.0%+18% +1.4%
+4.6%
0%
5%
10%
15%
Other Operating
Income6 22 51
Other Income 58 181 86
Fuel Cost 2 476 1 505 746
-10.4%
+5%
-25%
-20%
-15%
-10%
-5% FY09 Rev Cost FY10 Rev Cost Fuel price H1FY11
Non-Fuel Cost 2,977 2,623 1,150
Rentals 1,040 864 358
EBITDA -1,292 -266 245
-26.4% +11%-30%
+1.0%+11.7%
+6.2% -3.2%15.0%
20.0%
Proforma (Without AOG)**
EBITDA Margins -24.8% -5.6% 9.8%
EBITDA withoutOther Op. andNon-Op. Income
-26.4% -10.4% +4.6%
-6.5%+5%
+14.2%
-
-5.0%
0.0%
5.0%
.
FY09 Rev Cost AOG FY10 Rev Cost AOG FuelPrice
H1FY11
Aircraft grounding issue has impacted theairline since April 2009
An average of ~10 AOGs in FY10 and ~8
AOGs in H1 FY11 have been impacted -26.4%
+11%
+4%
-
-25.0%
-20.0%
-15.0%
.
30
-ve impact on EBITDA +ve impact on EBITDA EBITDA Margin for the period
* Account groupings for FY 09 & FY 10 are adjusted basis H1 FY11** Assumed KFA ran full capacity with the same RASK and same variable CASK** Fixed CASK declined since apportioned over a higher ASKM base
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Kingfisher Market Performance International
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Kingfisher has deployed international capacity onsome of the most lucrative International routes
1,257
1,400
Top 10 international markets fromIndia The total international traffic to and from India
has shown a CAGR of 14% between FY05-FY10 ( total growth of 68%)
845808
708 699 697800
1,000
1,200
(PPDE
W) The total international traffic to and from India for
Indian carriers has grown by 19% between H1FY10 and H1 FY11
608 585 573 559
200
400
600
Ma
rketSize Indian carriers currently account for ~40% of
flights on international routes from India
Other industry players have grown theinternational business and mar ins si nificantl -
0
9W revenue increased by 3 times and EBITDARmargin by 16 percentage points between FY07and FY10
Kingfisher has deployed capacity on 8 out ofthe10 largest international routes from India
Indicates Kingfisher presence
onewor as se e grow pa or n o
key international markets with enhancedconnectivity and traffic sources from worldslargest airlines British Airways, Qantas, CathayPacific, American Airlines, etc.
32Market Size based on PAX-IS plus data for Apr 09-Mar 10.PPDEW = Pax per day each waySource : DGCA, PAXIS, 9W investor presentation
f
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In a short span of time KF has managed to establish astrong market presence in these markets
International
CP Market share Capacity ShareFlight commencement
dateMetal
BOMHKG 42% 29% Sep 09 A330
ug
DELHKG 27% 21% Apr 10 A330
BLRDXB 19% 17% Jun 09 A320
BOMSIN 18% 15% Sep 09 A330
BOMLHR 15% 13% Jan 09 A330
DELDXB 12% 7% Apr 10 A320
DELLHR 12% 13% Mar 10 A330
DELKTM 11% 13% Apr 10 A320
DELBKK 11% 9% Apr 10 A320
BOMBKK 10% 11% Apr 10 A320
MAACMB 9% 11% Jan 09 A320
BOMDXB 5% 5% Apr 10 A320
KFA has already exceeded fair share of the local O&D markets in 8 out of 14 routes it operates vs. itscapacity share
33Market share and capacity share based PAX-IS plus data for Aug10 for local O&DBusiness Class passenger s flown data does not include First Class
Indicates Market share/Capacity share >1
Indicates Market share/Capacity share
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And ramped up capacity in a calibrated manner
International
Additional utilization of A320 capacity
Capacity Deployed
Addition of A330 capacity to LHR &A320 capacity to BKK,DXB & KTM
1,316
1,425
1,200
, ,DXB, CMB & DAC
AS
KM(mn)
610 648
772 792 780800
Launch of wide body A330o erations to London
322400
Addition of A330 capacity toWithdrawal of BLR-LHR-
0
Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
HKG & SINBLR operations
34
Th i t f th KF d t h l d t
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The growing acceptance of the KF product has led toa significant growth in business
International
66% 69%71% 72%
76% 74%
66%
65%71% 69% 71% 72% 72%
74% 73%60%
70%
80%
Load Factor
29%
46%
0%
10%
20%30%
40%
Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
KF LF% Indian Carriers LF% excluding KF
Total RASK
1.251.61
2.01 1.892.41 2.42
2.80 2.88 2.983.04 3.18 3.12 3.13 3.10
.
1.00
2.00
3.00
.
INR
Kingfisher Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
0.75 ..
0.00
Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
KFA Jet Airways
35KFA International Operations started in Sep089W income through sale & leaseback of aircraft was Rs 718 Cr in FY10 & Rs 240 Cr in H1 FY11
No of flights 56 184 640 831 1,192 1,288 1,268 2,229 2,472
Source: DGCA, Jet+Jetlite published financials
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and an improving operating performance
International
1.83
2.41 2.422.50
3.00
Total RASK
(51) (53)(100)
(50)
-
FY09 FY10 Q1 FY11 Q2 FY11
EBITDA1.09
-
0.50
1.00
1.50
.
INR
EBITDA CASK (400)(350)
(300)
(250)
(200)
Rsincrs
-
FY09 FY10 Q1FY11 Q2FY11
5.93
3.262.79 2.79
3.00
4.00
5.00
6.00
.
INR
(451)(430)
(500)
(450)
-
1.002.00
FY09 FY10 Q1 FY11 Q2 FY11
36
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The movement relative to peers has also been positive
All Figures in INR International
1.54
1.371.46 1.461.60
1.80
Pax RASK/Non-Fuel EBITDA CASK
1.651.57
1.66 1.681.80
2.00
Pax RASK/Non-Fuel EBITDAR CASK
1.21 1.20
0.60
0.80
1.00
1.20
.
1.01
1.71 1.73
0.60
0.80
1.001.20
1.40
1.60
0.24
.
-
0.20
0.40
FY09 FY10 Q1FY11 Q2FY11
KF Jet Airways
0.36
-
0.20
0.40
FY09 FY10 Q1FY11 Q2FY11
KF Jet Airways
KFA (Rs) FY09 FY10 Q1 FY11 Q2 FY11
EBITDAR Margin -301% -37% 4% 5%
Jet Airways (Rs. ) FY09 FY10 Q1 FY11 Q2 FY11
EBITDAR Margin 2% 18% 23% 26%
arg n - - - -
Pax RASK 1.09 1.51 1.96 1.97
Non-Fuel EBITDA CASK 4.57 2.26 1.63 1.63
arg n
Pax RASK 2.24 2.21 2.21 2.33
Non-Fuel EBITDA CASK 1.45 1.61 1.51 1.59
37Source: Estimated from Jet Airways published financialsEBITDA & EBITDAR Margins calculated onTotal Revenue for both carriers
- . . . . - . . . .
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Unexpected aircraft grounding & recovery plan
Of the 66 aircraft currently in our fleet, 34 are Airbus A320 model aircraftwhich use the V2500 engine supplied by IAE International Aero Engines AG(IAE). In February 2010, the United States Federal Aviation Administration(the FAA) issued a notice proposing adoption of a new Airworthiness
rec ve n respec o s ress corros on an crac ng o e eng ne rumexperienced in certain IAE V2500 engines. In November 2010, the FAA
issued such Airworthiness Directive, which prescribed mandatory actionscovering all V2500 engines in service. We have experienced these technicalroblems with our IAE V2500 en ines, which have reduced the eriod
between maintenance work for our A320 fleet to approximately 10,000 hours.
We have made arrangements with IAE to perform maintenance and supportwork on our existing fleet of engines, including undertaking those measuresidentified b the FAA and other su ort work desi ned to im rove on-winperformance. By 31 December 2010, we had re-introduced seven aircraft backinto service. We currently estimate, however, that we may not be able tointroduce the remaining seven grounded aircraft back into service and returnto operating at full capacity until 30 April 2011.
Fleet recovery schedule is as follows:
Sep' 10 Oct '10 Nov '10 Dec '10 Jan '11 Feb '11 Mar '11 Apr '11
Airbus 320 Family
38
Operating fleet in
period 20 23 25 26 28 30 32 34
Kingfisher has further planned multi-pronged initiatives for cost-
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g s e as u t e p a ed u t p o ged t at es o costcutting, revenue enhancement & capital re-structuring
Rationalizin Distribution Channels Debt Re-schedulementOne World Alliance
Key Revenue EnhancementInitiatives
Key Cost Reduction Initiatives Capital Recast
Reduction of S&D costs by reviewing distributionchannels, negotiating GDS contracts
Renegotiating Vendor Agreements
Additional airport & fuel discount*
*
RBI has approved debtrecast program of Kingfisher
Airlines
Key Highlights of program
Conversion of debt to equity
Membership with oneworldAlliance to drive inbound
domestic passenger growth
Compliance Audit
Focus on reduction in IT abuse/
E&M costs to reduce with new vendor
Renewal of operating leases at a discount toexisting rates
Head Count Rationalization
Lower interest rate
Moratorium on repayment
Equity Infusion
Received shareholders
Increase Baggage Revenue
Improve excess baggage feeenforcement
fraud & loss of revenue in theform of fare & ancillary fees
Replacement of high cost expat pilotsapprova o ra se a onacapital through equity basedsecurities
Promoter fund infusion
Co-branded Credit Cards
Re-negotiate King Club Amexco-brand card contract;introduce King Club ICICI co-brand card
Control Discretionary Spend
Reduce rentals, costs of transportation, localconveyance and communication
Kingfisher Express DTD Cargo Express service to
tap under penetrated air-cargodelivery service
, ,centres)
Operational Efficiency
Reduce fuel consumption for Airbus & ATRoperations
- -
39
- -checks, controlled redelivery)
* - Subject to capital raising
KFA D b R h b i l d ( / )
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KFA Debt Recast has been implemented (1/2)
Followin are the hi hli hts:
Consortium of lenders formed whereby security & cash flow is pooled.
Term loans of 9 year gate to gate maturity 2 year moratorium on principal repayment Ballooning repayment over a period of 7 years (See slide 44 for repayment schedule)
Rs. 750.10 Crs of term loans converted into Compulsorily Convertible Preference Shares (CCPS). . ,
time when the Company undertakes any GDR issue, or (b) March 31, 2011 or such later date asmay be mutually agreed, not later than 18 months from the date of allotment of CCPS at aconversion price to be determined as per SEBI Regulations.
s. . rs o erm oans conver e n o umu a ve e eema e re erence ares oRs.10 each at a coupon rate of 8% with a maturity of 12 years.
Reduction of interest rate on Term loan with effect from July 1, 2010 and Working Capital loan/PDP loan with effect from October 1, 2010 to 11.1% (approx) from current average of 14% perannum.
Rs. 297.4 Crs of Working Capital converted into Working Capital Term Loan (WCTL).
40
KFA D bt R t h b i l t d (2/2)
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KFA Debt Recast has been implemented (2/2)
Existing lenders have sanctioned additional Rupee Term Loan (RTL) and non fund based limitsamounting to Rs. 1,212 Crs out of which Rs. 768 Crs is RTL and Rs. 444 Crs is non fund based(Some of the above amounts have been disbursed). Additional RTL will be of 5 years tenor with a 2year moratorium on principal repayments (See slide 44 for repayment schedule)
Interest payment for the period from July 2010 to March 2011 funded by the banks and converted
into a Funded Interest Term Loan (FITL). The total FITL for the period amounts to Rs. 349.88 Crs.Out of this Rs.101.46 Crs has been converted into CCPS.
The following Promoter loans / capital have been converted:
Rs. 648 Crs of Promoter loans converted into CCPS of Rs. 10 each at a coupon rate of 6%,
to be converted into equity shares not later than 18 months from the date of allotment of thea a convers on pr ce o e e erm ne as per egu a ons.
Rs. 97 Crs of Redeemable Non Convertible Preference Shares converted into CCPS of Rs.10 each at a coupon rate of 6%, to be converted into equity shares not later than 18 monthsfrom the date of allotment of the CCPS at a conversion price to be determined as per SEBIRegulations.
41
C i f I t C t D it (ICD )
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Conversion of Inter Corporate Deposits (ICDs)
Rs. 709.31 Crs of ICDs converted into Optionally Convertible Debentures (OCDs) of Rs. 100 each ata coupon rate of 8%. The OCD holders have undertaken to convert the OCDs into equity sharessimultaneously with the raising of further capital by the Company by way of GDRs or any otherequity-based securities provided that the conversion does not trigger an open offer under SEBIs
a eover egu a ons.
42
KFA Debt : Post Debt Recast
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KFA Debt : Post Debt Recast
Particulars
(in Rs. Crs)
Debtbeforerecast
Conversion of debt Additional LoanDebt post
recastto CCPS To CRPS to OCDS to WCTL FITL RTL
WorkingCapital
590.5 (297.40) 293.10
Term Loan 4,263.49 (750.10) (553.10) 297.40 248.42 768.30 4,274.40
. .
Promoter loan 656.30 (648.00) 8.30
Intercor orate 1 137.32 709.32 428.00deposit (ICD)
sub total 6,814.0 (1,398.10) (553.10) (709.32) - 248.42 768.30 5,170.2
Other shortterm loan
75.20 75.20
Hire Purchase 86.15 86.15
Finance lease 675.73 675.73
43
Grand total 7,651.12 (1,398.10) (553.10) (709.32) - 248.42 768.30 6,007.30
Working Capital represents sanctioned fund based limits
Repayment Schedule for Term loan and Additional RTL
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Repayment Schedule for Term loan and Additional RTL
Particulars % of principal for termloan
% of principal foradditional RTL
FY 2012-13 5% 10%
FY 2013-14 7.50% 25%
FY 2014-15 7.50% 40%
FY 2015-16 15% 25%
FY 2016-17 15%
FY 2017-18 20%
-
FY 2019-20 10%
Total 100% 100%
44
FY 2012-13 repayment starts in October
Changes in Government policies expected to present furtherid
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upside...
Declared Goods status for ATF would result in lower uniform taxation on fuel
consumers.
FDI policy is expected to allow foreign airlines to take equity stake in domestic carriers in
the near future as the Ministry of Civil Aviation moved a proposal in 2009 to allow foreign
airlines to ac uire 25 ercent e uit of the 49 ercent FDI ca in domestic airlines.
45
Gl
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Glossary
9W Jet Airways GDP Gross Domestic Product
AAI Airports Authority of IndiaAirbus The Airbus Company
AOG Aircraft on Ground
ASKM Available Seat Kilometer
ATF Aircraft Turbine Fuel
GDR Global Depository ReceiptGDS Global Distribution System
IAE International Aero Engines
ICD Inter Corporate Deposit
INR Indian Rupee
ATV Average Ticket Value
Boeing The Boeing Company
CAGR Compounded Annual Growth Rate
CAPA Centre for Asia Pacific Aviation
ng s er r nes
KFC Kingfisher Class (Economy class)
KFF Kingfisher FirstKFR Kingfisher Red
LCC Low Cost Carrier
CCPS Compulsorily Convertible Preference Share
CRJ Canadair Regional Jet
CRPS Cumulative Redeemable Preference Shares
CRS Crores of Indian Rupees
DGCA Directorate General of Civil Aviation
OAG Official Airline Guide
OCD Optionally Convertible Debenture
Pax Passengers
Pax-IS Passenger Intelligence Services (by IATA)
PDP Pre - Deliver Pa ment
DTD Door - to- Door
E & M Engineering & Maintenance
EBITDA Earnings before Interest Tax
Depreciation & Amortization
EBITDAR Earnings before Interest Tax
RASK Revenue per Available Seat Kilometer
RBI Reserve Bank of India
RPKM/RPK Revenue Passenger Kilometer
RRPK Pax Revenue per Revenue Passenger Kilometer
RTL Rupee Term Loan,
EBIT Earnings before Interest & Tax
EBT Earnings before Tax
FAA Federal Aviation Administration (U.S.)
FITL Funded Interest Term Loan
FDI Forei n Direct Investment
SEBI Securities and Exchange Board of India
S & D Selling & Distribution expenses
S2 Jetlite
UB United Breweries Ltd.
UDF User Development Fee
46
FSC Full Service Carrier
FY Financial year ending March
USD US Dollars
WCTL Working Capital Term Loan
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Appendix (Supplement)
47
Appendix of miscellaneous information (1)
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Appendix of miscellaneous information (1)
I. Fleet Plan FY 11-16
11 12 13 14 15 16
M A M J J A S O N D J F M FY A M J J A S O N D J F M FY A M J J A S O N D J F M FY A M J J A S O N D J F M FY A M J J A S O N D J F M FY
A320 34 3 3 40 1 1 1 1 1 1 46 1 1 2 2 2 1 1 2 58 1 1 1 1 2 1 1 66 1 1 1 1 2 1 1 74
ATR 27 1 28 1 1 1 1 32 1 1 1 1 36 1 1 1 1 40 1 1 1 43
A330 5 1 1 7 1 1 1 10 1 1 1 1 14 1 1 1 1 18 1 1 20
Total 66 3 1 4 1 75 1 1 1 2 2 2 2 1 1 88 1 1 1 1 2 2 3 3 1 2 1 2 108 1 1 1 2 2 1 1 1 3 2 1 124 2 1 2 1 1 2 2 1 1 137
FromMarket
Source: Company
48
Appendix of miscellaneous information (2)
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Appendix of miscellaneous information (2)
II. Plan Cost Initiatives
Besides higherInternationalASKMgrowth/biggergauge/longerstagelength;320fleetreconfiguration;vendor
discountspostrecapitalization;othersignificantdriversofCASKcontrolinFY12overFY11,andFY13overFY12
are:
1) IntroductionofFoodforPurchaseonourlowcostKingfisherRed domesticnetwork,effectiveJan11.
Current yt eCompanyo erscomp imentary oo ona omestic ig ts.KFRcompriseso 65%to75%
ofourdomesticcapacity.
2) Wealso
have
aplanned
phase
out
of
expat
pilots
expected
evenly
in
FY12
and
FY13.
3) SevenofourA320leasesareupforrenewalinFY12,andanotherseveninFY13.TheFY13renewalsare
somewhatfrontloadedthuswithgreaterfullyearbenefits.Theserenewalsareplannedat20%below
thecurrentcontractedrentals.
4) Finally,weseeopportunities inchannelshifttoamorecosteffectiveS&Dstructure.For1HFY11,86%of
oursaleswerethroughtravelagencies,and14%weredirect(KFAticketoffices,callcenters,or
flykingfisher.com).
5) Ourdomesticfleetreconfigurationisestimatedtohaveanimpactofloweringourdomesticunitcostsby
2%to2.5%onayearlyrunrate.
PostFY13,thePlanexfuelCASKlevelsoffdespitecontinuingstrongerInternationalgrowth.InFY13,YoY
lannedInternationalASKMS rowthis46%;andafurther36%and30% rowthres ectivel inFY14,andFY15.
Whereas,domesticASKMSgrowthFY1315isplannedat22%peryear.
Allourfutureaircraftinductionsareexpectedtobeoperatingleases,andallbigmaintenanceisoutsourced.
Moreoframpsidegroundhandlingislikelytobeoutsourcedtoairportorgovernmentmandatedoperatorsper
thegovernmentsecuritydirectives.
49
Source: Company
Appendix of miscellaneous information (3)
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Appendix of miscellaneous information (3)
III. International vs. domestic operations
Historical break up of fleet, ASKMs and RPKMs for international and domestic operations and domestic vs. internationalyields
Domestic operations FY09 FY10 H1FY11
ASKMs (Million) 14,900 11,810 5,194
RPKMs (Million) 9,582 8,586 4,236
Passengers traveled 11,142,226 10,526,121 5,226,319
Passenger revenues(Million) 48,703 42,584 21,825
ATV 4,371 4,046 4,176
Total no. of flights 154,912 133,352 59,296A320 80,000 63,819 26,173
ATR 74,912 69,533 33,123
International operations FY09 FY10 H1FY11
ASKMs (Million) 932 2,991 2,741
RPKMs (Million) 550 2,039 2,065
Passengers traveled 87,949 537,311 595,522
Passenger revenues(Million) 1,018 4,522 5,375
ATV 1,1570 8,416 9,026
Total no. of flights 880 4,579 4,701
A320 252 2,082 2,610
ATR 638 362
A330 528 1,859 1,729
Total Operations FY09 FY10 H1FY11
Total year end fleet
A320 * 39 34 34
ATR * 33 28 27
A330 5 5 5
Total 77 67 66
50
ource: ompany
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Appendix of miscellaneous information (5)
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Appendix of miscellaneous information (5)
V. Unit Fuel Rate and Other Income
Rate Rs./liter FY10 1QFY11 2QFY11
UnitFuelRate
ota . . .
Domestic 35.08 39.77 39.01
International 26.12 28.91 28.37
Rs in Lakhs. Q1 Q2 H1
Particulars FY11 FY11 FY11
OtherIncome
Cargo 12,809 10,045 22,854Excess Baggage, Rebooking Charges /Cancellation 3,628 3,843 7,471
Operating Income(exc Pax) 16,437 13,888 30,325
Other Income-Non operating 4,418 13,294 17,711
Source: Company
52
Appendix of miscellaneous information (6)
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Appendix of miscellaneous information (6)
VI. King Club Membership Trend
Trendin
number
of
King
Club
members.
Proportion
of
passengers from
King
Club
members.
EndofFYmembercountFY 09: 9,89,783
FY 10: 12,53,802
FY 11 (1st
half): 14,60,203
Pax contribution 1H-FY11 domestic and international combined
KFF 70%
KFC 30%
KFR 25%
53
Source: Company
Appendix of miscellaneous information (7)
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ppe d o sce a eous o at o ( )
VII. Domestic KFF, KFC and KFR segmentation
Differences in cost/ASKM between Kingfisher and Kingfisher Red
Domestic1HFY11*
%higher
KFCAirbus/KFRAirbusCASK 12.5%
Difference in average pricing between Kingfisher red, Kingfisher class and Kingfisher first
*InternalCompanyAnalysis
omes c
KFF320ATV 17,662
KFC320ATV 5,235
KFR320ATV 4,134
KFRATRATV 3,509
*InternalCompanyAnalysis
54
Source: Company
Appendix of miscellaneous information (8)
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pp ( )
VIII. Seniormanagementandpilotdatafor12monthsending30thSep10.TherehavebeennodeparturesatSVPand
Pilots*
EVPlevels
for
the
period.
There
have
been
more
hiring
at
GM
and
VP
levels
than
exits,
and
many
of
these
new
hires
have
comefromFSCandLCCcompetition.Kingfishercontinuestobeastrongemployerbrandandtheinterestinseeking
employmentwiththeCompanystaysstrongasshownbythisdata.
es gne ur ng c ep
Headcount on Sep 10 697
Attrition 9%
* For Indian Pilots only- excludes expatriate pilots The totalno. of pilots employed by the company was 782 as on 30 th
Sep 10
Sr. Mgmt (GM & Above)
Headcount as on Sep 10 66
Joined between Oct 09 & Sep 10 13
Resigned between Oct 09 & Sep 10 10
Note: The 12 Senior Managers in the company have beenin place for an extended period
AdditionalNotesonPilotAvailability:
AsignificantnumberofAirForcepilotsinIndiajointhecommercialindustry.KFAhasrecruitedsome4045oftheminthe
past.However,
it
requires
significant
training
and
transition
before
they
can
take
command
on
the
commercial
aircraft.
It
takesabout1to1.5yearsforthemtobeATRcaptains,andlongerfor320s.Theyjoinascopilotsandneedatleast500hrs
beforetransitioningascaptains.
55
Source: Company