Kingfisher Airlines loss widens to Rs.754 cr

High finance costs, redelivery of planes and costs associated with fleet grounding take toll on earnings

Mumbai: The losses of Kingfisher Airlines Ltd widened to Rs.753.55 crore for the September quarter of the current fiscal againstRs.468.66 crore for the corresponding quarter of the previous year owing to high finance costs, redelivery of planes and costs associated with the grounding of planes. Revenue plunged to Rs.200 crore from Rs.1,552.87 crore a year ago.

Kingfisher Airlines has been in a “temporary holding pattern” operating a limited fight schedule flying just about 100 fights with 20 planes compared with 350-plus flights with 65 planes a year ago.

The Mumbai-based airline incurred a restructuring and idling cost ofRs.214.71 crore for the September quarter to maintain the grounded planes. It also had redelivery cost of Rs.233.44 crore for the reporting quarter against Rs.10.96 crore for the comparable quarter last year.

The finance cost was Rs.401.43 crore in the September quarter against Rs.334.38 crore in the comparable quarter of the last fiscal year.

The airline has been grounded since 1 October and it admitted that it has incurred substantial losses and that its networth has been eroded.

“However, having regard to capital-raising plans, group support, the request made by the company to its bankers for further credit facilities, planned reconfiguration of aircraft and the revival plan proposed to be submitted to the DGCA—Director General of Civil Aviation—for restoration of the scheduled operators permit, these financial statements have been prepared on the basis that the company is a going concern and that no adjustments are required to the carrying value of assets and liabilities,” a note by chairman Vijay Mallya said.

The company said in a statement that its adjusted loss was lower, Rs.220 crore for the September quarter.

“After adjusting for finance cost of Rs.401 crore, a one-time cost of Rs.448 crore due to redelivery of aircraft and restructuring/idle costs and taxes, the net loss was Rs.754 crore,” the statement said.

Kingfisher Airlines is preparing a comprehensive plan to restart operations, which will be shared with DGCA and bankers, the airline said without disclosing a timeframe.

“The airline is in discussion with various stakeholders to ensure that there are no future disruptions. Kingfisher Airlines expects to resume operations in the near future,” the statement added.

The airline hasn’t shown a profit since its inception in 2005.

The fiscal second quarter is traditionally a lean period for airlines because of the monsoon and the third and fourth quarter are the strongest because of festivals and holidays.

Shares of Kingfisher Airlines ended at Rs.12.89 apiece on BSE on Wednesday, up 0.47% from their previous close, while the exchange’s benchmark index rose 0.30% to close at 18,846.26 points.

Kingfisher Airlines has been grounded since 1 October following a strike by engineers and pilots at the airline who hadn’t been paid since March.

Consequently, DGCA suspended the licence of the airline.

Employees resumed work on 25 October, after reaching a settlement under which salaries for March, April and May would be paid by 12 November. Salaries for the months of June to September will be paid once the company has been recapitalized. And from October, the company will pay salaries a month late, which means the October salary will be paid by the last week of December. The salaries of March and April have already been paid.

To add to the airline’s woes, State Bank of India (SBI), the largest lender to the cash-strapped Kingfisher Airlines, has said it wants the promoters of the airline to infuse a minimum of $1 billion from any mode by November-end for its revival.

“...we do not put a gun on their head, but the more comes in the better because airlines are a very capital-intensive business. I think about $1 billion would be a good starting point,” SBI chairman Pratip Chaudhuri told reporters in New Delhi on Wednesday.

“We have said please attend to the capital needs urgently and we would like to see some tangible progress at least by November 30,” PTI reported Chaudhuri as saying.

Rival carrier Jet Airways (India) Ltd, the nation’s second largest airline by passengers carried, said its second quarter loss narrowed to Rs.99.67 crore from Rs.713.63 crore in the year-earlier period. Sales rose 25.6% to Rs.4,137.63 crore in the quarter ended 30 September. The lean season, economic slowdown and the consequential dip in industry passenger traffic, coupled with high fuel prices and rupee depreciation, affected the results, said Jet Airways chief commercial officer Sudheer Raghavan.

Another listed carrier SpiceJet Ltd will announce its results on Monday.

Even as airlines are running in the peak season currently, Jet Airways has decided to reduce seats by 10.9% weekly starting 28 October, according to the winter schedule filed with DGCA. Jet Airways had 3,780 seats a week in the last winter schedule of 2011, while it has opted to deploy 3,369 in the current winter schedule. DGCA has not approved Kingfisher Airlines’s winter schedule for 2012. Kingfisher Airlines offered 2,930 seats a week in the last winter schedule.

Consultancy firm Centre for Asia Pacific Aviation (Capa) has also said that Kingfisher Airlines needs more than $1 billion to fully fund a turnaround business plan, mirroring SBI chairman’s view.

The immediate requirements to actively relaunch the airline—as opposed to operating a skeleton fleet of five aircraft—have also increased from an earlier $600 million to closer to $700 million, Capa said.

Kingfisher Airlines has $2.5 billion of liabilities, of which $1.1 billion is bank debt. Banks may be able to recover some of their loans depending on the quality of the collateral in place, but this is likely to be a long-drawn process and risks are inevitable, Capa said in its 23 October report.

The remaining $1.4 billion of liabilities to vendors and employees is largely irrecoverable, except for some secured debt where airport operators and oil companies hold bank guarantees that could be invoked.

Senior Kingfisher Airlines executives said the airline is looking at resuming operations by the third or fourth week of November, if the regulator revokes the suspension of its licence and allows it to fly.

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