Kingfisher Airlines

The Directors present the 13th Annual Report along with the Audited
 Accounts of your Company for the nine-month period ended March 31,
 2008.
 
 As Members are aware, the investment by the UB Group during calendar
 year 2007 presented your Company with an opportunity to actively pursue
 various synergies between the UB Group owned erstwhile Kingfisher
 Airlines and your Company.  Your Directors retained the services of the
 reputed international consulting firm Accenture to advise your Company
 on how best to exploit synergy benefits. Accenture, after a detailed
 study, advised that the Commercial Airline Division of the erstwhile
 Kingfisher Airlines be merged into your Company and that the Charter
 Services Division Undertaking of your Company be hived off into a
 separate entity, with a view to consolidating the two scheduled
 commercial airline businesses to create a more competitive business,
 both in scale and scope of operations, Such consolidation would help in
 optimizing cost, revenue and capital synergies and lead to overall
 enhancement in shareholder value. Accordingly, pursuant to a Composite
 Scheme of Arrangement (the Scheme) approved by the Members and the
 Creditors, inter alia, of your Company, and sanctioned by the Honble
 High Court of Karnataka at Bangalore vide the Honble Courts order
 dated June 16, 2008, the Commercial Airline Division Undertaking of the
 erstwhile Kingfisher Airlines was de-merged and transferred into your
 Company. The Appointed Date for the de-merger is April 1, 2008. The
 Charter Services Division Undertaking of your Company, was transferred
 on a slump sale basis as a part of the aforesaid Scheme into a new
 Company named Deccan Charters Limited upon receipt by Deccan Charters
 Limited of the requisite Permit for operating Non-Scheduled Air
 Transport Services from the regulatory authorities, on October 10,
 2008. The Appointed Date for the said slump sale is January 1, 2008. On
 September 5, 2008, the name of the erstwhile Kingfisher Airlines
 Limited was changed to Kingfisher Training and Aviation Services
 Limited and the name of your Company was changed to Kingfisher Airlines
 Limited, as envisaged in the Scheme.
 
 In view of the de-merger Appointed Date being April 1, 2008, and with a
 view to present to the shareholders a transparent financial statement
 of the airline business post-integration and to enable your Company to
 synchronize its accounting year as April 1 to March 31 every year in
 line with the uniform financial year of the other companies in the UB
 Group, of which your Company is a constituent, the Board of Directors
 of your Company decided that your Company should present one single
 financial statement to the Members commencing April 1, 2008 (the
 Appointed Date under the Scheme) and ending on March 31,2009. As a
 consequence, the reporting period for the accounts being placed before
 you is for a period of nine months from July 1, 2007 to March 31, 2008.
 
 Operations
 
 Your Companys operations during the nine month period ended March 31,
 2008 comprises the Scheduled Airline operations of your Company for the
 period July 1, 2007 to March 31, 2008 and the Charter Services
 operations for the period July 1, 2007 to December 31 , 2007 and have
 resulted in:
 
                                                      (Rs in millions)
                                           Nine month      Year ended
                                         period ended   June 30, 2007
                                       March 31, 2008
 
 Gross Income                                  15454           19899
 Earnings before financial                     (2379)            932
 charges, lease rentals,
 depreciation & amortization
 and taxes (EBITDAR)
 Add/Less : Depreciation &                       366             439
 Amortisation
 Lease Rentals                                  3547            4031
 Financial charges                               779             624
 Loss before taxes                             (7071)          (4162)
 Provision for taxes                           (4945)             34
 (incl. FBT)
 Net Profit/Loss) from ordinary                (2126)          (4196)
 activities after tax
 Extraordinary items                             245               0
 Net loss after tax                            (1881)          (4196)
 
 Scheduled Airline Operations
 
 Your Company is a significant player in the Indian domestic aviation
 sector and during the period under review had the widest reach covering
 more destinations than any other domestic carrier.
 
 Since inception till March 31, 2008, your Company carried approximately
 17.5 million passengers, with a fleet of 41 aircraft, a schedule of 255
 flights daily and a route network covering 61 destinations.
 
 Your Company inducted 4 aircraft (3 Airbus A320s and 1 ATR 72-500) and
 returned 4 aircraft (4 ATR 42-320s) during the period under review. The
 domestic aviation industry continued to witness capacity expansion by
 all airline operators and the competition continues to be stiff among
 all operators putting pressure on yields. The rising fuel costs during
 the period and increase in other operating costs, combined to cause an
 operating loss during the period. Individual items of the financial
 statements are more fully discussed in the section titled Management
 Discussion and Analysis.
 
 As a major step towards exploiting the synergies between the two
 groups, during the period under review, the brand Air Deccan was
 re-branded as Deccan with imagery identical to the Kingfisher
 brand.
 
 Subsequent to the period under review, the brand Deccan was phased
 out and your Company now offers the following classes of service:
 
 Kingfisher First - Premium Business class of service
 
 Kingfisher Class - Premium Economy class of service
 
 Kingfisher Red - Low fare basic class of service
 
 Your Company commenced international operations on September 3, 2008
 with daily flights on the Bangalore - London sector.
 
 For a predominant part of calendar year 2008, oil .  prices continued
 to shoot up and coupled with the exorbitant rates of taxes on Aviation
 Turbine Fuel in India, put the Civil Aviation industry in India under
 severe pressure. Recession in economies worldwide and the economic
 meltdown culminating in the collapse of the financial markets and the
 slump in the aviation industry worldwide (with quite a few airlines
 filing for bankruptcy), has further aggravated the situation, with
 avenues for funding temporarily blocked.
 
 The Government of India has recognized the crisis the aviation industry
 is facing and has initiated a dialogue with all the airlines in India
 to discuss measures to enable the aviation industry to tide over the
 crisis and become substantially viable for the future.
 
 Charter Services
 
 The Charter Services Undertaking of your Company has, subsequent to the
 period under review, been transferred on a going-concern basis for a
 consideration of Rs. 69.10 crores, to Deccan Charters Limited in
 accordance with the Scheme. The Appointed Date for the transfer is
 January 1, 2008.
 
 Accordingly, the report for the year under review on the Charter
 Services operations relates to the period July 1, 2007 to December 31,
 2007. During the said period, the Charter Services Operations continued
 to perform satisfactorily and increased its presence in off shore
 flying for the oil sector.
 
 The operations of ferrying pilgrims at Sri Mata Vaishnodevi Temple in
 Jammu based on an arrangement with the Temple Trust, which commenced
 four years back, yielded significant revenue for your Company. Your
 Company also commenced ferrying operations for the Amarnath Yatra. The
 customer base for and the revenue from the technical services offered
 by your Company increased significantly. Your Company offered third
 party maintenance as well as operational and maintenance services to
 large Indian corporates. The avionics maintenance facility established
 to offer maintenance of helicopter radio equipment commenced
 operations. During the period under review, there has been an increased
 focus on trading in Bell helicopter spare parts.
 
 Subsidiaries
 
 Subsequent to the period under review, your Company has incorporated a
 wholly owned overseas subsidiary named Northway Aviation Limited for
 the purpose of financing pre- delivery payments and aircraft
 acquisition.
 
 Subsequent to the period under review, your Company has acquired the
 entire share capital of Vitae India Spirits Limited as a result of
 which the said company has become a wholly owned subsidiary of your
 Company.
 
 Outlook
 
 The integration of the entire commercial airline business into your
 Company pursuant to the Scheme has resulted in a consolidated entity
 having a fleet size of 86 aircraft, network coverage of 64 cities
 operating over 400 flights a day and a market share of over 25%. The
 synergy benefits mapped out by Accenture are likely to be realized over
 a period of time and your Directors are hopeful that this will reflect
 in the financial results of your Company once the economy emerges from
 this recessionary phase and the Government of India takes necessary
 measures to boost the prospects of the aviation industry, particularly
 through tax reforms.
 
 Given the slow-down in the air travel market, profitability remains a
 concern for airlines in the short term, given high cost of operations.
 However, the UB Group has faith in the future of the Indian aviation
 industry as Civil Aviation growth goes hand in hand with GDP growth.
 The Indian economy is a trillion dollar economy growing at 7% per
 annum, despite the current economic situation. Civil Aviation is a key
 engine of this growth where there is no rail or surface transport
 alternative given the size and geography of the sub-continent.
 Passenger traffic in India has grown from 14 million in 2005 to over 43
 million in 2008. Your Company is well-poised to meet the dynamic
 challenges faced by the industry in the short term as well as to take
 advantage of the growth potential in the long term.  The reduction of
 prices of aviation fuel and reduction of sales tax on such fuel which
 is under active consideration of the government together with
 introduction of stringent cost reduction and control measures will have
 positive impact on the working results of your Company and sufficient
 future taxable income will be available against which the deferred tax
 asset can be realized.
 
 In view of operating losses incurred during the year, your Directors do
 not recommend payment of any dividend.
 
 Capital
 
 During the year under review, your Companys Authorised Share Capital
 was increased from Rs. 150,00,00,000 (Rupees One Hundred Fifty Crores
 only) to Rs. 500,00,00,000 (Rupees Five Hundred Crores only )
 comprising of 40,00,00,000 (Forty Crores) Equity Shares of Rs. 10/-
 each and 1,00,00,000 (One Crore) Preference Shares of Rs.100/- each.
 
 Subsequent to the period under review, pursuant to and in terms of the
 Scheme, an aggregate of :
 
 1.  130,033,350 Equity Shares of Rs. 10/- each of your Company were
 allotted to the equity shareholders of Kingfisher Training and Aviation
 Services Limited (erstwhile Kingfisher Airlines Limited) in the ratio
 of 3 equity shares of your Company for every 7 shares held by them in
 Kingfisher Training and Aviation Services Limited (erstwhile Kingfisher
 Airlines Limited); and
 
 2.  9,700,000 6% Redeemable Non-Cumulative Preference Shares of
 Rs.100/- each of your Company were allotted to the preference
 shareholders of Kingfisher Training and Aviation Services Limited
 (erstwhile Kingfisher Airlines Limited) in the ratio of 1 preference
 share of your Company for every preference share held by them in
 Kingfisher Training and Aviation Services Limited (erstwhile Kingfisher
 Airlines Limited).
 
 Consequent upon the said allotment of equity shares as mentioned above,
 United Breweries (Holdings) Limited along with its subsidiaries holds
 60.49% of the paid up share capital of your Company and therefore your
 Company has become a Subsidiary of United Breweries (Holdings) Limited.
 
 Change of Name
 
 Pursuant to and as envisaged in the Scheme, the name of your Company
 was changed from Deccan Aviation Limited to Kingfisher Airlines Limited
 w.e.f. September 5, 2008. The Fresh Certificate of Incorporation
 consequent upon Change of Name has been received from the Registrar of
 Companies, Karnataka.
 
 Depository System
 
 The trading in the equity shares of your Company is under compulsory
 dematerialization mode. As of date, equity shares representing 88% of
 the equity share capital are in dematerialized form. As the depository
 system offers numerous advantages, members are requested to take
 advantage of the same and avail of the facility of dematerialization of
 your Companys shares.
 
 Auditors Report
 
 As regards the observations in para 4 of the Auditors Report, the
 relevant Notes to Accounts are self-explanatory.
 
 In para 5 of the Auditors Report, the Statutory Auditors have
 qualified their report by remarking that the receipt of subsidy from
 aircraft manufacturers should be recognised as income on an systematic
 basis over the period necessary to match them with related costs which
 they are intended to compensate though the accounting treatment does
 not appear to be covered by the Accounting Standard (AS)-19 (Accounting
 for Leases) issued by the Institute of Chartered Accountants of India.
 In the opinion of the Directors:
 
 (1) The lessor of the Aircraft is a person other than the Aircraft
 manufacturer and the lease contract is independent of the contract with
 Aircraft manufacturer.
 
 (2) The termination, if any, of the lease contract does not in any
 event breach the conditions for the grant of subsidy by the Aircraft
 manufacturer.
 
 (3) The subsidy value, referred to in Para 5 of the Audit Report have
 been received by the Company during the 15 months period ended June 30,
 2006. As per Section 28 (iv) of the Income Tax Act 1961, and precedents
 available under Income Tax laws, including pronouncements of the Apex
 Court, the revenue arising out of support packages will be treated as
 income for taxation purposes and therefore, it would not be prudent for
 the Company to treat the said revenues differently in the books of
 Accounts and for Taxation purposes.  
 
 (4) In the event of non compliance of the contract with the Aircraft
 manufacturer, the resultant possibility of recovery of subsidy granted
 by the Aircraft manufacturer has been disclosed as contingent liability
 and this accounting treatment adopted by the Company is also based on
 the well established principle of differentiation of revenue receipt
 and Capital receipt.
 
 In view of the above, in the opinion of the Company, the accounting
 treatment of the support package, received from the Aircraft
 manufacturer, as Income in the year of accrual and receipt is in order.
 
 As regards the observations in para 11(a) of the Auditors Report, the
 Note number 22 to Notes to Accounts (Schedule 22) is self- explanatory.
 
 As regards the observations in the Annexure to the Auditors Report,
 the Company has taken/is taking necessary steps to ensure improvement
 in certain procedures and also for compliance with the relevant laws.
 
 Directors
 
 Captain K J Samuel, Mr. Vijay Amritraj and Mr. Anil Kumar Ganguly
 retire by rotation and, being eligible, offer themselves for
 reappointment.
 
 Subsequent to the period under review, the following Directors resigned
 from the Board of Directors of your Company:
 
 Mr. Hitesh Patel w.e.f . July 07, 2008
 
 Ms. Bala Deshpande w.e.f. September 10, 2008
 
 Mr. S N Ladhani w.e.f. October 01, 2008
 
 Lt. Gen. N S Narahari w.e.f. October 14, 2008
 
 Prof. P N Thirunarayana w.e.f. October 14, 2008
 
 Col. Jayanth K Poovaiah w.e.f. October 15, 2008
 
 Capt. G R Gopinath and Capt. K J Samuel resigned from their executive
 positions as Managing Director and Executive Director respectively
 w.e.f. October 16, 2008 and continue as Non-Executive Directors.
 
 Subsequent to the period under review, Mr. Piyush G. Mankad, Dr. Naresh
 Trehan, Diwan Arun Nanda and Mr. Ghyanendra Nath Bajpai were appointed
 as Additional Directors on October 15, 2008 and hold office up to the
 date of the ensuing Annual General Meeting of your Company Notices in
 writing have been received from Members signifying their intention to
 propose the appointment of Mr. Piyush Mankad, Dr. Naresh Trehan, Diwan
 Arun Nanda and Mr. Ghyanendra Nath Bajpai as Directors of your Company
 at the ensuing Annual General Meeting.
 
 Auditors
 
 M/s. B K Ramadhyani & Co., your Companys Auditors are eligible for
 re-appointment at the Annual General Meeting and it is necessary to fix
 their remuneration.
 
 Listing of Shares of Your Company
 
 The equity shares of your Company are listed on the Bombay Stock
 Exchange Limited and the National Stock Exchange of India Limited. The
 listing fee for the year 2007-08 has been paid to  these Stock
 Exchanges.
 
 Subsequent to the period under review, 130,033,350 Equity Shares of Rs.
 10/- each of your Company issued and allotted to the equity
 shareholders of Kingfisher Training and Aviation Services Limited
 (erstwhile Kingfisher Airlines Limited) pursuant to the Scheme, have
 been listed on the Stock Exchanges where the existing equity shares of
 your Company are presently listed.
 
 Annual General Meeting
 
 Your Company has obtained extension of time up to December 31, 2008,
 from the Registrar of Companies, Karnataka, Bangalore, for holding the
 Annual General Meeting for the nine-month period ended March 31, 2008.
 
 Corporate Governance
 
 A report on Corporate Governance is annexed separately as part of this
 Report along with a certificate of compliance from a Company Secretary
 in practice. Necessary requirements of obtaining certifications/
 declarations in terms of Clause 49 have been complied with.
 
 Management Discussion and Analysis
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, Management Discussion and Analysis Report is annexed and
 forms an integral part of the Annual Report.
 
 Human Resources
 
 Employee relations remained cordial. Particulars required under Section
 217(2A) of the Companies Act, 1956 read with the Companies (Particulars
 of Employees) Rules, 1975, as amended from time to time forms part of
 this Report. However, as per provisions of Section 219(1 )(b)(iv) of
 the Companies Act, 1956, the Report and Accounts are being sent to all
 the Members excluding the Statement containing the particulars of
 Employees to be provided under Section 217(2A) of the Act. Any Member
 interested in obtaining such particulars may inspect the same at the
 Registered Office of your Company between 11:00 a.m. to 1:00 p.m. on
 all working days till the date of the 13th Annual General Meeting.
 
 Employee Stock Option Plan (ESOP)
 
 During the period from July 1, 2007 to March 31, 2008, the Company
 allotted 328385 Equity Shares of Rs. 10/- each against the exercise of
 equivalent vested options. The said shares have been listed on the
 Bombay Stock Exchange Limited and the National Stock Exchange of India
 Limited. Considering the options forfeited and exercised, the
 outstanding stock options granted under ESOP 2005 were 1,084,065 and
 under ESOP 2006 were 2,401,600 as on March 31, 2008.
 
 During the year 731,400 options have been granted afresh under ESOP
 2006 which will vest from September, 2008 and February, 2009 over a
 period of four anniversaries thereof.
 
 Disclosures as required by Clause 12 of the SEBI (Employee Stock Option
 Scheme and Employee Stock Purchase Scheme), Guidelines 1999 are annexed
 to this Report.
 
 Conservation of Energy, Research and Development, Technology
 Absorption, Foreign Exchange Earnings and Outgo
 
 The particulars as prescribed under section 217(1)(e) of the Companies
 Act, 1956 and the rules framed there under are not applicable to your
 Company.
 
 The relevant information relating to Foreign Exchange Earnings and
 Outgo appear in the Note Nos. 9 to 11 of Schedule 22 to the Financial
 Statements.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, in relation to
 financial statements for the nine-month period ended March 31, 2008,
 your Board of Directors report that:
 
 - in the preparation of the Accounts for the nine-month period ended
 March 31, 2008, the applicable accounting standards have been followed
 along with proper explanation relating to material departures;
 
 - accounting policies have been selected and applied consistently and
 that the judgments and estimates made are reasonable and prudent so as
 to give a true and fair view of the state of affairs of your Company as
 at March 31, 2008 and of the Loss of your Company for the nine-month
 period ended March 31, 2008;
 
 - proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of your Company and
 for preventing and detecting fraud and other irregularities;
 
 - the accounts for the nine-month period ended March 31, 2008, have
 been prepared on a going concern basis.
 
 Thank You
 
 Your Directors place on record their sincere appreciation for the
 continued support from shareholders, customers, the Government of India
 especially the Ministry of Civil Aviation and the Directorate General
 of Civil Aviation, the various State Governments, Airports Authority of
 India, banks and financial institutions, suppliers, other business
 associates and employees.  Your Directors also wish to place on record
 their appreciation of the continued co-operation and support received
 from the Original Equipment Manufacturers, financing and leasing
 companies and banks for their continued support and understanding.
 
                            For and on Behalf of the Board of Directors
 
 Bangalore                                          Dr. Vijay Mallya
 October 15, 2008                                       Chairman