Kingfisher Airlines Limited is an airline group based in India.

Its head office is in Andheri (East), Mumbai and Registered Office in UB City, Bangalore. Kingfisher Airlines, through its parent company United Breweries Group, has a 50% stake in low-cost carrier Kingfisher Red. The airline has been facing financial issues for many years. Until December 2011, Kingfisher Airlines had the second largest share in India's domestic air travel market. However due to the severe financial crisis faced by the airline, it has the fifth largest market share currently, only above GoAir. Kingfisher Airlines was the holder (along with only seven other airlines) of the 5-star rating by Skytrax along with Cathay Pacific, Qatar Airways, Asiana Airlines, Malaysia Airlines, Singapore Airlines, and Hainan Airlines. However, in light of the current turmoil of the airlines, Skytrax ranking for Kingfisher Airlines has now been suspended. Kingfisher operates 120 daily flights with regional and long-haul international services. In May 2009, Kingfisher Airlines carried more than 1 million passengers, giving it the highest market share among airlines in India.Kingfisher also won the Skytrax award for India's best airline of the year 2011. Kingfisher Airlines is also the sponsor of F1 racing outfit, Force India, which Vijay Mallya also own. Kingfisher Airlines began its operations on 9 May 2005, following the lease of four Airbus A320 aircraft. The inaugural flight was from Mumbai to Delhi. On June 15, 2005, it became the first (and only) Indian airline to order the Airbus A380. It placed orders for five A380s, five Airbus A350-800 aircraft and five Airbus A330-200 aircraft in a deal valued at over $3 billion. Delivery of the A330s was due to start in late 2007, followed by the A380s in 2010 and the A350s in 2012. Ever since its launch in May 2005, Kingfisher Airlines has blazed a trail of innovations and introduced a range of market-firsts that have completely redefined the whole experience of flying. By elevating its customers to a level of being guests and not just passengers, Kingfisher Airlines has endeared itself to consumers. Kingfisher Airlines was the first Indian airline to introduce in-flight entertainment (IFE) system on domestic flights. Passengers onboard are provided complimentary welcome kit that contains a pen, facial tissue and headphone to use with the IFE system. Kingfisher Airlines has made alliance with Dish TV to provide live TV entertainment to passengers. As of July 2007, Kingfisher operates only on domestic routes; however it started its international operations on 3rd September, 2008 with a flight between Bangalore and London, and later on added new international destinations, namely Hong Kong, Dhaka, Colombo, Singapore, Dubai and Bangkok. However, on 15th September 2009, Kingfisher Airlines withdrew the London service. On December 19th, 2007 Air Deccan and Kingfisher Airlines decided to merge. Kingfisher Airlines parent company United Breweries (UB Group) have acquired 46% of Air Deccans parent Deccan Aviation, which possesses 52% of the total stakes. In May 2009, Kingfisher Airlines carrier over a million passengers that provided it the highest market share among the airlines in India.

Problems which Kingfisher Airlines is facing

Fuel Bills
The airline has Rs 500-crore worth of unpaid aviation turbine fuel bills due to Hindustan Petroleum Corporation Ltd (HPCL). Of this, around Rs 450 crore has been backed by bank guarantees. Indian Oil Corporation (IOC) too has put the airline on a cash-and-carry mode. The company has so far not disclosed the extent of its dues to Bharat Petroleum Corporation Ltd (BPCL). It's not just Kingfisher, other airlines too have dues which we need to recover, said an HPCL official. For instance, national carrier Air India's dues to the public sector oil companies stand at a whopping Rs 2,400 crore.

Unpaid Airport Bills

Kingfisher's unpaid bills go beyond oil companies. The airline recently faced the prospect of being put on a cash-and-carry mode by the GMR-operated Delhi and Hyderabad airports. The airline failed to make its payments in April and May and notched up dues of approximately Rs 100 crore to the two airports. Kingfisher Airlines was able to escape being put on cash-and-carry only after it outlined a payment structure plan to clear the dues.

Mounting Debt
The airline's total debt stood at Rs 7,651 crore last year, but it managed to bring that down to Rs 6,007 crore after a debt recast plan with its lenders. Mounting debt is an industry-wide problem. Jet Airways had a debt of Rs 13,680 crore as on March 31, 2011. Kingfisher's promoters, however, had to pledge their entire stake to the lenders as part of its debt recast plan. Since its inception in 2005, the airline has only had one profitable quarter. With their stock price falling sharply, the airline also runs the risk of losing its assets to the lenders. Their planes might need to be hypothecated to the bank if they start to default on bank payments and fail to turn around, said a market analyst. Since January this year, the Kingfisher Airlines stock price has fallen 71 per cent, from Rs 66.85 on January 3 to Rs 38.95 yesterday.

The airlines shareholders have not got any value for their money. Now we have a strange spectacle where those holding the airlines tickets are not getting their seats as it has simply stopped flying. This follows the sudden decision of Kingfisher Airlines to cancel many of its important trunk route and metro flights simply 'unannounced'. Not just that even when the announcement did come, the actual no go flights were far more than the planned no go flights. Obviously the problem inside Kingfisher is far more serious than what has been perceived so far. That the Directorate General of Civil Aviation, the supposedly tough regulator, had no clue about it was shocking. That it has now started investigating the matter can only be of minor comfort to those not choosing to fly Kingfisher and definitely of no comfort to those who bought tickets to nowhere. Perhaps, it is time to rewrite the famous television ad that said 'Neighbour's Envy, Owner's Pride'. It is the other way round with Kingfisher Airlines promoter Dr Vijay Mallya, who as the owner of the airline must be surely envious of neighboring airlines (other domestic carriers) which are still flying, though not with as much pride. Kingfisher Airlines has accumulated loss of over Rs 4,283 crore (Rs 42.83 billion) at the end of March 31, 2011 and never made even a rupee in profit since it was launched in 2005. Its total debt rose to an alarming proportion before the Reserve Bank of India approved debt restructuring by public sector and private banks in early 2011. After recast, Kingfisher Airlines total debt reportedly came down to Rs 7,057 crore (Rs 7,057 billion) which is still considered very high for a private domestic carrier. In the process of restructuring, lending banks also lost a lot of money. In the debt restructuring done by banks, 13 in all, they agreed to convert a big part of their debt into equity by acquiring the Kingfisher Airlines share at Rs 63 per scrip as against the then prevalent price of Rs 40. The banks, in all, hold over 24 per cent of the airline equity. But between then and now, the share value has eroded sharply to around Rs 22 which is just one-third of what it was when the shares were given to them as part of debt restructuring. So one can imagine how the banks have also suffered a serious blow. A top State Bank of India official has now said that the bank has stopped extending any kind of credit to airlines in India. We don't know if this excludes the state-owned Air India whose problems and financial woes are many times more than Mallya's. But being state-owned, Air India's maalik -- the Government of India -- can always print notes and monetise the deficit. But Mallya has no such option unless he literally spirits away the spirit money to save his carrier. However, the speed with which that money is drying up is simply amazing. Obviously, no entrepreneur worth his salt can continue to do business if he does not make money even six years after being in business

In the business of booze, you can feel high while on ground, but in the airline business you actually need to fly to be high. So when Mallya announced that his airline will cancel some major flights till November 19, it seemed to be a clear admission of his airline being in serious financial crisis. After all, about two months back, media reported the observations made by Kingfisher Airlines' auditors -- namely, B K Ramdhyani & Co. In accounting parlance, they asked if Kingfisher Airlines could be even described as a 'going concern' and these remarks were published in the 2010-11 annual report of the company. A 'going concern' refers to a company's ability to continue functioning as a business entity in the near future and it is extremely rare that auditors make such mention in the passing. If one went by the definition of the erstwhile Sick Industrial Companies Act, if net worth of any company had been eroded by more than 50 per cent then it had to be referred to the (now defunct) Board for Financial and Industrial Reconstruction (BFIR). Though there are other ways of dealing with sick companies, the spirit behind the original legislation has not changed. Applying that rule, as also logic, Kingfisher Airlines is certainly not a healthy company by any stretch of the imagination. In response to the observation of its auditor, Kingfisher Airlines top brass responded by saying, "We are 100 per cent viable, strong going concern." Its director on board, Ravi Nedungadi, then noted that when the debt restructuring was done, the airline's lenders -along with lead bank SBI and SBI Caps -- had independently assessed Kingfisher Airlines' viability. Nedungadi even said the company's accounts with the banks were classified as 'standard' which meant they were not classified as non-performing. If it was not non-performing and standard then Kingfisher Airlines is surely taking a long time to issue its GDR which incidentally is based on the previous six months average stock price. Even when it wanted to raise $300 million -- both, before and soon after debt restructuring -it felt the ruling share price was not high enough to go in for GDR. Today, the ruling price of its shares is not even one-third of what it was when it was dilly-dallying. In the last two-and-a-half years, its fleet size has come down from 89 to 66. The fleet size shrunk because more than a dozen of its aircraft were grounded due to serious engine problems for which it threatened to sue the engine maker, IAE. But even as the engines were being re-engineered and overhauled, the market was turning the other way with rising fuel severely eroding the yields. At times, Kingfisher did touch a load of as high as 80 per cent, but it simply was not making money as its cost were too high, mainly debt-related. So it went in for debt restructuring. Six months after that, that is, in September 2011, it announced that Kingfisher Airlines will completely withdraw from the low-fare segment that was being run under the Kingfisher Red brand.

It said it would take at least four months before it again became a complete full service carrier. For this to happen, it said that many of its all economy planes (be it A319 or A320, besides A 321 which were only in twin configuration) would be completely reconfigured to full service frills with at least eight business class seats and remaining 150 or so in economy configuration. Under the all-economy configuration, an A320 aircraft could seat 182 passengers. So what was Kingfisher gaining by reducing the seats? Obviously its calculation showed that a full service flight got passengers who were ready to pay more therefore earn higher yields. In this context, the airline management has stated that the decision to suspend flights on select trunk routes was to quickly complete the reconfiguration of the aircraft so that it becomes all Kingfisher First. This would ensure its early exit from the low-fare segment. This is fantastic logic which flies in the face of everything. The world over every airline worth its name is looking for space in the low-fare segment. Even a very quality-conscious Singapore Airlines is launching its low-cost variant, called Scoot, for international travel, both medium- to long-haul flights. We already have Air Asia, besides Air Arabia, FlyDubai, Air India Express, etc on the foreign routes. As for domestic operations, Jet Airways is going full blast on the low-fare segment. IndiGo has shown how success can be achieved in the segment. Besides, SpiceJet and GoAir are also in that segment. Hence wherefrom Mallya's Kingfisher, which till date could not make money on part full-service and part low-fare, will now make moolah when it has no dominant position, it is in serous debt, its fleet size shrunk, nearly 75 of its pilots have quit and the company is unable to even pay salary to the employees and, in some instances, allegedly delayed the depositing of TDS? Besides, Kingfisher Airlines owes a sizeable amount of money to state-owned Airports Authority of India and GMR Delhi airport, to oil companies that have twice grounded its fleet by not supplying fuel until payment was made, to banks, etc. This is a long list. Just before the grounding of flights a few days back, Nedungadi said Kingfisher Airlines has sought further cushion from banks to ease its debt burden but denied that it was seeking yet another debt restructuring. What difference does it make whether you call it reducing debt burden or restructuring of debt? In the new formula, Kingfisher Airlines has sought lenders' help to substitute high-cost rupee borrowing with lower cost foreign currency debt The airline has also asked banks to help it release nearly Rs 170 crore (Rs 1.70 billion) stuck with aircraft leasing companies who gave aircraft to Kingfisher on lease against maintenance reserves by providing necessary bank guarantees.

One wonders if this is the same Dr Mallya who four years ago was talking of operating Airbus A340-500 for long-haul direct flights to the United States from India. He had booked five A380s. All that is now part of his dream which has truly travelled to a very distant past and his vision has become increasingly blurred due to many factors both within and beyond his control. True Mallya chose to chew more than he could swallow. In a belated response, DGCA has sought an explanation from Kingfisher Airlines for its sudden cancellation of major domestic flights and a couple of foreign flights to Bangkok. A side effect of this has been the decision of DGCA to actively engage airlines that are in deep financial crisis and toughen the procedures to grant aircraft acquisition approvals. What is the purpose of allowing airlines to acquire aircraft, be it outright purchase or through lease, when they do not have the money to pay lease rentals (as it happened with Paramount Airways) or installments for outright purchase? Since the latter was about to happen, Mallya cancelled his huge orders for many more A 320s, A 340s and A 380s. The economic recession of 2008-09 and its repeat version now were also partly responsible for this. If money does not come into Mallya's kitty, it will become increasingly difficult for him to receive all his flying guests and keep them entertained. Perhaps, he may well have to say bottoms up and the party could be over. Even Mallya did not expect in his wildest dreams that the valuation of Kingfisher Airlines will drop to just $245 million which is even lower than what he paid Captain G R Gopinath for Air Deccan and Jet Airways' Naresh Goyal for Subrato Roy's Air Sahara. Reasons for the fall of Kingfisher Airlines 1. Acquisition of Deccan airways at the time of Global economic Meltdown(2008-2009) 2. Effect of Economic slowdown between 2008-2009 3. Recovery time is not sufficient to recover all debt i.e. 2010 4. High fuel price, high crude oil price & Global slowdown in 2011 5. Yield is low & Capital is high 6. Bigger ad valorem sales tax 7. High state sales tax

The six months between April and September 2011 have been disastrous for all airlines in India because of a steep rise in crude prices. Oil prices went from around $88 a barrel in January 2011 to almost $115 in April, a massive 25 per cent increase in just three months. Fuel costs add up to 40 per cent of the variable costs of airlines. Oil prices hovered around the $100 mark until September when they came down to $80 a barrel. In November, the price is again up to $100. The rise in the price of fuel was exacerbated by a fall in the rupee, which has declined by 11 per cent against the dollar. An estimated 70 per cent of airlines' expenses are incurred in dollars. Kingfisher Airlines has losses of Rs.732 crore between April and September. Jet Airways lost more-Rs.836 crore. Yet, it is Kingfisher which is gasping for air, not Jet. Why? History matters. Unlike other airlines, which have had ups and downs, Kingfisher has never recorded a profit since it began operations in 2005. In 2010-11, when crude prices were moderate and the rupee strong, Kingfisher recorded losses of Rs.1,027 crore. In comparison, Jet's loss was Rs.86 crore. SpiceJet, which lost Rs.312 crore between April and September this year, made a profit of Rs.100 crore in 2010-11. IndiGo was said to have recorded a Rs.500-crore profit in 2010-11. Kingfisher's poor financial performance stands in contrast to its award-winning performance for service. It is the only Indian airline and one of seven globally to have a five-star rating from UK-based aviation consulting firm Skytrax. Kingfisher may be a victim of its business model which focuses on the upper-end flier. The slowdown of 2008-2009 decimated the high-end market. There is evidence that price matters most to the Indian consumer. But Vijay Mallya is determined to stick to his model. In September, he announced closure of Kingfisher Red, the low-cost arm which emerged after his takeover of Air Deccan in 2007-08. The rest of the Indian aviation industry seems headed in the opposite direction. IndiGo and SpiceJet have done well as low-cost carriers. Jet now runs more than half its services under the low-cost brand it started in 2009, Jet Konnect. Kingfisher's debts add to its already high costs-its interest expense to net sales ratio in JulySeptember was 21 per cent. The ratio was 6.8 per cent for Jet and 1.1 per cent for SpiceJet. The airline will need a big revenue boost to offset costs. Unfortunately, it may have the wrong business model. Temporary Suspension of Supply of Fuel to Kingfisher Airlines Ltd. State-run oil refiner Hindustan Petroleum Corp. Ltd (HPCL) temporarily suspended supply of fuel to Kingfisher Airlines Ltd on for the second time in four months. The suspension of supply by the airlines largest vendor, citing Rs. 130 crore in dues, grounded many of its flights during peak hours, resulting in a loss of revenue and adding to the financial stress of Indias second largest airline by passengers carried. HPCL has demanded at least Rs. 100 crore immediate payment to clear the dues, said a person aware of the development. He did not want to be identified, considering the sensitivity of the issue.

Kingfisher said in a late night statement that there was a temporary disruption of supplies leading to a delay on some flights due to a minor issue with one of our ATF (aviation turbine fuel) suppliers. The airline said regular fuel supply had been restored and that flights would continue normally. Earlier, a senior HPCL executive confirmed that his company had suspended fuel supply to Kingfisher Airlines temporarily and it will be sorted out in the next few hours as the airline is willing to clear some dues. The official did not want to be identified. Calls to an HPCL spokesperson did not get any response. The fuel supply is expected to resume by midnight. But these delays are an indication of the depth of the financial troubles that Kingfisher Airlines is facing. The airline will lose its credibility if the schedule is disrupted frequently, said an airline consultant, requesting anonymity. In mid-July, HPCL had briefly stopped jet fuel supply to Kingfisher Airlines, but resumed it after the airline paid for aviation turbine fuel. HPCL had put Kingfisher Airlines on cash-and-carry mode as the carriers outstanding exceeded the bank guarantee it had furnished against default. Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd have been supplying fuel to the airline only on cash before flights for several months. At the Delhi airport, six Kingfisher flights were delayed after 5.30pm, according to an airport official, who declined to be named. Passengers are sitting inside the terminal. New check-ins have been stopped by the airline, he said. Atul Wakankar, an information technology professional, was among at least 200 people stranded at the Mumbai airport on Thursday evening. His Kingfisher flight to Bangalore IT111 at 6.20pm didnt take off. All the Kingfisher flights are stranded. There are no flights taking off. Nobody is there to tell you the exact situation. First (they were told by the airline) it was weather problem; then it was operational problem; I think it will become another problem in some time, Wakankar said, describing the chaos at the countrys second busiest airport. I will wait for some more time and then go back home. On Wednesday, Sahara Group chairman Subrata Roy acquired a 42.5% stake in Force India, the Formula One team owned by liquor baron Vijay Mallya, for $100 million (Rs. 490 crore). The deal is expected to help Mallya infuse funds into the racing team and leave money to revive other struggling group companies, including Kingfisher Airlines, as the needs of the Formula One team have been met. Mint reported that the airline has delayed salary payments for the second consecutive month. The carrier suffered a loss of Rs. 1,027 crore in the fiscal year ended 31 March, by when it had accumulated Rs. 7,057.08 crore in debt.

Salaries are typically credited to the accounts of its employees on the seventh day of every month. They are yet to be credited this month; last month, they were credited only by the 18th. Kingfisher Airlines shares rose 11.8% to Rs. 23.25 apiece on the Bombay Stock Exchange, while the benchmark Sensex dropped 0.44%. The suspension of fuel supply happened after market hours. BAIL OUT PACKAGE Days after Prime Minister Manmohan Singh accused foreign-funded NGOs of acting in the interest of other countries, National Advisory Council members Aruna Roy and Deep Joshi, along with other activists besides economists, have asked the Prime Minister not to bail out the financially troubled Kingfisher Airlines. According to a Business Standard, the letter they sent to the Prime Minister said that public funds should not be used to pay for the mismanagement of a profligate private enterprise. Recent statements from the Ministers of Civil Aviation and Finance, the activists said, seem to suggest that the government is on the verge of succumbing to the scare tactics of Vijay Mallya who owns the now cash-strapped Kingfisher. The government seems set to persuade banks to provide him yet another bailout to fund a company that has so far raked up almost Rs 7,000 crore in losses, entirely funded by loans, the letter added. Since most of the money has been lent by nationalised and public sector banks, which are repeatedly capitalised by the government, it would ultimately mean that this profligate private enterprise will be bailed out with public funds, according to the missive, signed by Nikhil De, Sucheta Dalal, Jayati Ghosh, Praful Bidwai, Biraj Patnaik, Prashant Bhushan, Suman Sahai, Ashwini Sharma, EAS Sharma, Jagdeep Choker and Kapil Bajaj. We, a group of concerned citizens, are writing to express our strong objection to any further bailout of the flamboyant billionaire, they said, adding it will only allow him to continue to mismanage the airline. The letter goes on to allege complicity of Indian banks in the bankruptcy of the Mumbaibased airline, as banks took no action though a report on the companys poor financial condition was available since September 2011. The report by Veritas, an independent Canadian research firm, clearly anticipated and documented the fate of Kingfisher Airlines, they claimed. The report, called A Pie in the Sky, also warns UB Holdings, the parent company of Kingfisher Airlines, to be teetering on the verge of bankruptcy. Kingfisher Airlines book equity has been wiped out, although audited financials pretend otherwise, it added. The silence of the banks, the letter by Roy and others said, amounts to dereliction of duty, since Kingfisher Airlines' inability to pay endangers their own profits. The letter quotes Veritas as saying thus, Unless the banking institutions have provisioned judiciously for the debt provided to Kingfisher Airlines approximately Rs 4567 crore (USD 986 million) in loans to Kingfisher in addition to standby letters of credit, etc it renders the disclosed capital position of the banks unreliable. Also, the letter said, it is hard for us citizens to believe that the government could do nothing

to protect taxpayers funds or prevent further haemorrhaging of Kingfisher Airlines over the past five months after this report. The letter goes on to urge the Prime Minister to provide no bailout to the airline without forcing Mallya to liquidate his own personal assets to pay for the excesses of his airline. The letter said the airline boss must be forced to bring in at least Rs 4,000 crore to Kingfisher. This is easily doable, the letter said. Unless the government demonstrates its willingness to initiate tough action, the people will be forced to explore other options to ensure justice and fair play.