second question:Industry structure and developments

a. The Indian economy continued to be buoyant during 2007-08, providing a positive framework for the aviation industry in the country. Economic momentum, positive demographics, an inherent latent demand for air travel as well as significant steps initiated towards development of airport infrastructure at major metropolitan cities augur well for the industry. b. However, increase in crude prices during the period under review resulted in a surge in Aviation Turbine Fuel (ATF) costs worldwide. In addition, input costs in India are also higher than other countries on account of various duties, taxes and levies. Fare and surcharge increases implemented by airlines as a result of the higher input costs have resulted in a slow-down in demand for air travel. c. Capacity growth continued to be in excess of growth in market demand during 2007-08. Fares below break-even levels in case of routes with marked over-capacity along with the impact of higher input costs have significantly contributed towards industry losses of around USD 1 billion during 2007-08. d. Progressive policies implemented by the Government of India including liberalization of the Air Services Agreement with various countries have further strengthened Indias place as a preferred global destination. Even as Indian carriers expanded their footprints worldwide, various international carriers have increased their operations into India. Apart from major metropolitan cities, international carriers have also included various tier II and tier III cities as part of their India network. e. Marking the successful foray of public-private partnerships in the infrastructure segment in the country, state-of-the-art greenfield airports at Hyderabad and Bangalore commenced commercial operations. In addition, the planned modernization of Kolkata and Chennai airports, 35 non-metro airports have been identified for development based on the public-private partnership format. This, in addition, to other significant policy measures by the Government has provided a positive direction to the aviation industry in the country. 2. Segmentwise or Product-wise performance a. During the period under review, your Company operated in a single business segment, i.e. of providing scheduled and non- scheduled air transportation services. b. Further, during the period under report, your Company operated only in India and did not have operations outside India. c. Accordingly, no separate segment disclosures for primary business segment and geographical disclosures are required to be given. 3. Outlook a. Given the slow-down in the air travel market, profitability remains a concern for airlines in the short term given high cost of operations. b. From a long term perspective though, air travel continues to have immense growth potential in the country with regard to both domestic and international air traffic providing for increased opportunity to connect metropolitan and regional centers across the country as well as provide seamless connectivity between major Indian destinations and the rest of the world. c. 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. 4. Internal control systems and their adequacy a. Your Company has a proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorised, recorded and reported properly and applicable statutes, codes of conduct and corporate policies are duly complied with.

Your Companys Audit Committee comprises of five

NonExecutive Directors: Mr A K Ganguly, Chairman, Prof. P N Thirunarayana, Mr. S N Ladhani, Ms. Bala Deshpande and Lt Gen N S Narahari. One of the objectives of the Audit Committee is to review the reports submitted by the Internal Audit Department and to monitor follow-up and corrective action by Management. The Audit Committee has been reconstituted on October 15, 2008 and comprises of Mr. Anil Kumar Ganguly- Chairman, Diwan Arun Nanda, Dr. Naresh Trehan and Mr. A .K. Ravi Nedungadi.

d. Your Company has a Corporate Compliance Procedure to ensure that all laws, rules and regulations applicable to our industry are complied with. A Corporate Compliance Certificate is placed at Board Meetings periodically. e. The Company Secretary is the designated Compliance Officer to ensure compliance with SEBI regulations and with our Listing Agreement with National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

f. Your Company has a process of both external and internal safety audits for each area of operation. Your Company is in compliance with all laws, rules and regulations relating to airworthiness, air safety and other statutory operational requirements. g. Your Company, as part of its Risk Management strategy, reviews, on a continuous basis, its strategies, processes, procedures and guidelines to effectively identify and mitigate risks. Further, the Management has developed a procedure to ensure adequate disclosures of key risks and mitigation initiatives to the Audit Committee of the Board. 5. Consolidation of the scheduled airline business pursuant to the Scheme a. In June 2007, the UB Group, one of the India's largest conglomerates, acquired a controlling stake in your Company via preferential allotment of shares followed by open offer and market purchase from public shareholders. b. In order to benefit from consolidation in terms of synergy benefits, the Board of Directors of your Company, based on the advice of a reputed consultancy firm, Accenture, decided to de-merge and transfer the commercial ariline division undertaking of the erstwhile Kingfisher Airlines into your Company to creat a more competitive business, both in scale and scope of operations. c. The UB Group initiated new branding strategies and implementation of the new look for the fleet of aircraft in place of the earlier "Air Deccan" branding. Most importantly the UB Group focused on providing a higher quality of care and service to its guests at all customer touch points and towards implementation of better operational strategies. d. By adding Kingfisher Red to its service class, Kingfisher Airlines provides passengers with three classes of fares, Kingfisher First (business class); Kingfisher Class (premium economy class) and Kingfisher Red (low fare economy class). e. Kingfisher Airlines is now able to cater to the entire spectrum of the air travel market providing relevant services to the price-seeker, the value-seeker as well as the service-seeker. 6. Analysis of operational performance for the nine-month period ended March 31, 2008 The current financial period is for nine months from July 1, 2007 to March 31, 2008 and is, therefore, not strictly comparable with the results of the previous financial period of 12 months from July 1, 2006 to June 30, 2007 (Fiscal 2007). The Charter operations reflected are for a period of six months from July 1, 2007 to December 31, 2007 and airline operations represent only scheduled airline operations of former Deccan.