Project

Proposal for Investment in Kingfisher Airlines

Prepared for
S C LOWY

PREPARED BY
Finance Department

INTRODUCTION
Kingfisher Airlines is an airline group based in India. Its head office is The Qube 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 5th largest market share currently, only above Go Air. Kingfisher Airlines is one of the only seven airlines awarded 5-star rating by Skytrax along with Cathay Pacific, Qatar Airways, Asiana Airlines, Malaysia Airlines, Singapore Airlines, and Hainan Airlines Kingfisher operates 250 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 owns the Skytrax award for India's best airline of the year 2011.

ORIENTATION

Kingfisher Airlines serves 63 domestic destinations and 8 international destinations in 8 countries across Asia and Europe. Kingfisher's short haul routes are mostly domestic apart from some cities in South Asia, Southeast Asia and Western Asia. All short haul routes are operated on the Airbus A320 family aircraft. ATR 42s and ATR 72s are used mainly on domestic regional routes. Kingfisher has its medium, long-haul destinations in East Asia, Southeast Asia, and Europe. Its first long haul destination was London, United Kingdom which was launched in September 2008. It has plans to launch new long haul flights to cities in Africa, Asia, Europe, North America and Oceania with deliveries of new aircraft. All long haul routes are operated on the Airbus A330-200. Kingfisher Airlines' fleet currently consists of ATR 42, ATR 72 and Airbus A320 family aircraft for domestic and short haul services and Airbus A330-200s for international long-haul services. The average age of its fleet as of January 2009 was 2.3 years. All ATR's and a few aircraft from the A320 family are used for Kingfisher Red service.

KEY ISSUES
The company has been performing in an excellent manner from its existence. In 2008 there was world crisis but it continued its performance. We are now facing a liquidity crunch due to rising fuel costs and a fierce price war in the market. But to continue with our success and sustain our business we need some investments to liquidate our illiquid assets. We at Kingfisher think that your firm would definitely be able to help us as your focus is on illiquid assets. With Asias most experienced team of professionals across the globe and wellestablished relationships throughout the globe built on trust, professionalism and experience we are sure that SC Lowy would be able to get us back on track. We also look forward to your straight-forward approach, expert in-house research, and fast and efficient transaction capabilities. As we share many of your values such as discipline, determination, proactiveness we at Kingfisher feel that we can together work on this issue and turn the tables! We invite you to Bangalore to experience our hospitality and to discuss this proposal further.

COST-BENEFIT ANALYSIS
The company is rising back as the aviation industry is rising back. We are expecting that the company is going to earn good profit, so it will have its break even within 4 years.

The ROI will be rising.

PROJECT COST
The expected cost for the project is 300 million. This cost includes processing cost, aggregate cost including uncertain changes.

TERMS OF PAYMENT
The payment for the amount will be made through account in two installments i.e. 150 million in each installment.

JURISDICTION
Any dispute is subjected to Mumbai High Court.