Kingfisher Airlines Q4 loss trebles to Rs 1,150 cr

Kingfisher lost Rs 1,150 cr in the quarter to end-March, vs a loss of Rs 360 cr a year ago

Reuters / Mumbai May 31, 2012, 11:16 IST

Kingfisher Airlines' fourth-quarter net loss more than trebled as huge cuts in the number of flights compounded the woes of a cash-strapped carrier facing high fuel prices and intense competition for low fares.
The high-profile airline, which is owned by flamboyant liquor baron Vijay Mallya, lost Rs 1,150 crore in the quarter to end-March, compared with a loss of Rs 360 crore a year earlier.

Kingfisher, which was India's No. 2 airline until a year ago, has been the biggest victim of turbulence in India's aviation industry, where six main carriers face a total debt load of $20 billion and $2 billion in annual losses.

It is now the smallest carrier in India by market share. Shares in the airline have plummeted more than 80% since the beginning of 2011, shrinking the airline's market value to just under $100 million.

Kingfisher shares slumped as much as 6.3% in early trading on Thursday to a record low of Rs 10.35.

The carrier blamed losses on high fuel prices, a weak rupee and an "unprecedented, tough operating environment," but said it would return to normal services within 12 months.

"The company has a focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months backed by a recapitalization plan that the company is actively pursuing and confident of achieving," it said in a statement on Thursday.

National carrier Air India has been forced to cut most of its international routes due to industrial action by its pilots, handing Jet Airways an opportunity to increase aggressively its market share in international routes.

Low-fare and mostly domestic carriers such as IndiGo - the only airline making money in India - and SpiceJet have also gained market share recently as Kingfisher and Air India have suffered.

SpiceJet said on Wednesday that its net loss for the January-March quarter had widened more than four-fold, but it expected lower costs once the company starts importing jet fuel directly.

Fund constraints

Kingfisher needs at least $500 million immediately to keep flying, according to the Centre for Asia Pacific Aviation, but there has been no sign of funding in the near term.

The company said its net loss for the year to end-March was Rs 2,330 crore, more than double its loss in the previous fiscal year.

India's plans to allow foreign airlines to invest up to 49% in local carriers - for which Kingfisher has lobbied hard - has not yet taken off, adding to its funding crisis.

Mallya has repeatedly insisted that several domestic and international investors are interested in his company, and for months the names of many foreign airlines and local tycoons have been reported as prospective White Knights, but so far there has been much talk and no money.

If Kingfisher fails to turn the airline around, its banks - which have $1.3 billion in loans outstanding - would be left to pick over the carcass in a country that does not have a formal bankruptcy process.

Loans are secured in part by a combination of guarantees by the airline's parent, the UB group, as well as Kingfisher shares, Mallya's personal guarantees, its Mumbai real estate assets and the Kingfisher brand itself, bankers said.

European planemaker Airbus, which has accommodated Kingfisher by pushing its aircraft deliveries back in the queue, would lose outstanding orders for 92 planes with a combined list price of $12 billion. It would also see Kingfisher's fleet enter the second-hand market.

http://business-standard.com/india/news/kingfisher-airlines-q4-loss-more-than-trebles/166355/on

Air India to turn to expat pilots sacked by Jet Airways

NEW DELHI: Air India will turn to expat pilots sacked recently by Jet Airways to beef up its dwindling numbers in a last-ditch attempt to normalise operations devastated by a 24-day strike by pilots.

"Air India seeks to operate a small international schedule from now on with the help of 200 pilots, for which it is looking to hire 50-60 expats sacked by Jet Airways recently," a senior official in the civil aviation ministry told ET.

The stricken national carrier is attempting to restore some semblance of normalcy to its crippled international operations, and improve financial performance to meet the milestones set by the government as a condition for the 30,000-crore bailout package. Money will be released only if the airline meets certain performance targets, such as dropping unprofitable routes.

The strike has cost the debt-laden airline more than Rs 330 crore in revenues and is worsening an already difficult financial situation. Air India's losses stand at Rs 20,000 crore and it has a debt of over Rs 43,000 crore.

Jet Airways, India's largest airline by market share, has decided to terminate the services of 72 expats after the near-collapse of Kingfisher Airlines forced several pilots of the Vijay Mallya-promoted carrier to seek jobs elsewhere.

Jet, which reported a doubling of losses in the fourth quarter ended March 2012, is looking to cut costs by hiring locals. Salaries of expat pilots are higher than those of their Indian counterparts.

Air India, whose operations have been affected by the 24-day strike by the 400-strong Indian Pilots' Guild (IPG), is operating a curtailed international schedule with nearly 120 executive/management pilots. The airline has sacked 101 of the 400 agitating pilots, who are demanding exclusive rights to fly Boeing 787 Dreamliner aircraft. The airline has not taken delivery of the aircraft so far.

However, after the terminations, the pilots have piped down.

Striking Pilots will Become Redundant

The striking Air India pilots have agreed to resume work if their colleagues are either taken back immediately or an assurance is given to this effect. The government, however, has rejected this demand saying the pilots should join without any preconditions.

"AI has already got in touch with some of the available pilots and if the IPG members do not rejoin, they will become redundant as Air India is working on a plan to fly only on profitable international routes. So our requirement for pilots is going to come down," the official said.

Flying on profitable routes is one of the milestones for Air India and the civil aviation ministry recently set up an oversight committee to decide the routes that would be shut and those that would continue. The airline's losses have been blamed on high costs and a large concentration of unprofitable routes.

Air India's decision puts further pressure on the striking pilots, whose numbers had started thinning due to strong government pressure. Some pilots have returned to work and there is a feeling of inevitability among those still on strike.

There is a shortage of commanders in India and domestic airlines heavily depend on expatriates to fulfill their needs. But a few members of the IPG, who did not wish to be identified, agreed there would be no place for them if 400 pilots were to start looking for jobs. About 500 expat pilots are employed by various domestic airlines, but their services are likely to be terminated by December 2013.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/air-india-to-turn-to-expat-pilots-sacked-by-jet-airways/articleshow/13694617.cms

Kingfisher Airlines Q4 loss trebles to Rs 1,150 cr

Kingfisher lost Rs 1,150 cr in the quarter to end-March, vs a loss of Rs 360 cr a year ago

Kingfisher Airlines' fourth-quarter net loss more than trebled as huge cuts in the number of flights compounded the woes of a cash-strapped carrier facing high fuel prices and intense competition for low fares.
The high-profile airline, which is owned by flamboyant liquor baron Vijay Mallya, lost Rs 1,150 crore in the quarter to end-March, compared with a loss of Rs 360 crore a year earlier.

Kingfisher, which was India's No. 2 airline until a year ago, has been the biggest victim of turbulence in India's aviation industry, where six main carriers face a total debt load of $20 billion and $2 billion in annual losses.

It is now the smallest carrier in India by market share. Shares in the airline have plummeted more than 80% since the beginning of 2011, shrinking the airline's market value to just under $100 million.

Kingfisher shares slumped as much as 6.3% in early trading on Thursday to a record low of Rs 10.35.

The carrier blamed losses on high fuel prices, a weak rupee and an "unprecedented, tough operating environment," but said it would return to normal services within 12 months.

"The company has a focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months backed by a recapitalization plan that the company is actively pursuing and confident of achieving," it said in a statement on Thursday.

National carrier Air India has been forced to cut most of its international routes due to industrial action by its pilots, handing Jet Airways an opportunity to increase aggressively its market share in international routes.

Low-fare and mostly domestic carriers such as IndiGo - the only airline making money in India - and SpiceJet have also gained market share recently as Kingfisher and Air India have suffered.

SpiceJet said on Wednesday that its net loss for the January-March quarter had widened more than four-fold, but it expected lower costs once the company starts importing jet fuel directly.

Fund constraints

Kingfisher needs at least $500 million immediately to keep flying, according to the Centre for Asia Pacific Aviation, but there has been no sign of funding in the near term.

The company said its net loss for the year to end-March was Rs 2,330 crore, more than double its loss in the previous fiscal year.

India's plans to allow foreign airlines to invest up to 49% in local carriers - for which Kingfisher has lobbied hard - has not yet taken off, adding to its funding crisis.

Mallya has repeatedly insisted that several domestic and international investors are interested in his company, and for months the names of many foreign airlines and local tycoons have been reported as prospective White Knights, but so far there has been much talk and no money.

If Kingfisher fails to turn the airline around, its banks - which have $1.3 billion in loans outstanding - would be left to pick over the carcass in a country that does not have a formal bankruptcy process.

Loans are secured in part by a combination of guarantees by the airline's parent, the UB group, as well as Kingfisher shares, Mallya's personal guarantees, its Mumbai real estate assets and the Kingfisher brand itself, bankers said.

European planemaker Airbus, which has accommodated Kingfisher by pushing its aircraft deliveries back in the queue, would lose outstanding orders for 92 planes with a combined list price of $12 billion. It would also see Kingfisher's fleet enter the second-hand market.

http://business-standard.com/india/news/kingfisher-airlines-q4-loss-trebles-to-rs-1150-cr/166355/on

Kingfisher Airlines Q4 loss more than trebles

The company has a focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months backed by a recapitalization plan

Mumbai: The net loss of cash-strapped Kingfisher Airlines Ltd more than trippled for the quarter ended 31 March 2012 owing to stubborn jet fuel cost and rupee depreciation

Vijay Mallya-promoted carrier, that scaled down its operations due to cash crunch, posted a net loss of Rs. 1152.52 crore for the March quarter compared to Rs. 355.54 crore the corresponding quarter of the previous year.

The sales for the reporting quarter declined to Rs. 741.12 crore from Rs. 1626.14 crore for 31 March 2011, mainly due to trimming operations.

Kingfisher Airlines had introduced a temporary “holding plan’’ wherein the carrier will fly only little over 100 flights a day instead of 350 plus flights a year ago.

“Kingfisher Airlines in now continuing on it’s previously stated “Holding Plan” with a limited fleet and simultaneously progressing on it’s aircraft reconfiguration plan to contain losses in this very tough operating environment for the Indian aviation industry,’’ the airline said in a media statement.

The company has a focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months backed by a recapitalization plan that the company is actively pursuing and confident of achieving, it said.

The jet fuel cost for the airline for the reporting quarter declined to Rs. 545.12 crore compared to Rs. 668.42 crore for the March quarter of 2011.

The employees cost for reporting quarter came down to Rs. 136.96 crore from Rs. 172.05 crore and aircraft lease rental cost declined to Rs. 100.11 crore from Rs. 247.43 crore.

The decline in costs were largely because of “holding plan’’.

“The Indian aviation industry is confronted with an unprecedented, tough operating environment - intensified by consistently high fuel prices and the depreciating Indian rupee,’’ the airline said.

Fuel prices have increased by over 40% over last year compounded by the weakened rupee. The industry’s demand growth in the domestic market at 13% in FY12 over last year has been overshadowed by a 17% growth in industry capacity leading to a pressure on the yields and the load factor for the industry, the airline said.

Kingfisher Airlines never made a profit since its inception.

“There was an incremental one-time loss of Rs. 743 crore due to early redelivery of the aircraft and Rs. 338 crore due to restructuring costs,’’ the airline statement said.

The airline, which is eyeing foreign direct investment from international airlines, also blamed the adverse publicity for its poor performance.

“Rationalization of capacity in the last two quarters of FY12 and continued adverse publicity led to a disproportionate loss of revenue,’’ it said.

According to the financial statement, the airline has a total liability, including short and long term, of Rs. 14162.42 crore as of 31 March 2012.

The airline also made a net loss of Rs. 2328 crore in the last financial year against Rs. 1027.39 crore for the year 2010-11.

http://www.livemint.com/2012/05/31084657/Kingfisher-Airlines-Q4-loss-mo.html

Kingfisher Airlines net loss trebles in Q4 on high fuel costs, falling rupee

Bangalore, May 31:

Kingfisher Airlines net losses have trebled during the fourth quarter of last fiscal because of higher fuel costs and a falling rupee.

Net losses increased to Rs 1,151.52 crore, while income from services more than halved to Rs 741.27 crore, the airline's press statement said.

Notably, the fourth quarter losses contributed to almost 50 per cent of the company's total losses for 2011-2012. For the entire year, the company's losses more than doubled to Rs 2,328 crore (Rs 1,027.4 crore). The company's performance was impacted primarily due to additional fuel cost and additional cost due to depreciation of the Rupee and lower revenue generation due to reduction of operational capacity in an attempt to contain losses, the statement said.

During the fourth quarter of 2011-12, the company's fuel expenses came down by 18 per cent to Rs 545.12 crore because of reduction in operations. For the full year, fuel expenses grew nearly 30 per cent to Rs 2,945.89 crore.

In the filing with the Bombay Stock Exchange, the auditors have noted that the company has “incurred substantial losses and its net-worth has been eroded”. Aviation analysts and auditing experts pointed out that though the auditors were being conservative in their reporting, the company has sought to differ with them in a bid to help their balance sheet. For instance, the company said in the BSE filing, “Deferred Tax Asset is recognised on account of unabsorbed depreciation and business losses for the year ended March 31, 2012, aggregating to Rs 1,118.08 crore. The management is of the opinion that there is a virtual certainty supported by convincing evidence against which such deferred tax will be realised, notwithstanding that the auditors have opined to the contrary”.

Kingfisher Airlines stock price closed at an all-time low of Rs 10. 50, down nearly five per cent on Thursday.

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3477792.ece

Passenger revenues nosedive on capacity rationalisation

Bangalore, May 31:

Rationalising of capacity led to drop in passenger revenues for troubled Kingfisher Airlines during 2011-12.

The airline announced its plans to rationalise its operations during the last fiscal in order to contain mounting losses. On the domestic sector, Kingfisher recorded an operating revenue drop of 14 per cent alongside five per cent reduction in capacity.

On its international routes, the company saw five per cent dip in operating revenues amidst six per cent reduction in capacity.

Towards the end of the fiscal, Kingfisher Airlines had to cancel its international operations as IATA suspended it from BSP platform. A press statement from the company said that the airline, while continuing its “previously-stated ‘holding plan' with a limited fleet”, is also progressing on its aircraft reconfiguration plans to contain losses. However, the company has a “focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months”.

Lease rentals

Kingfisher Airlines believes that this would be possible with its recapitalisation plans and is confident of achieving it, added the release.

A reduced capacity has also brought down the company's aircraft lease rentals to about Rs 100 crore (Rs 247.43 crore) during the fourth quarter, while it came down to Rs 868.45 crore (Rs 984 crore) for the full year.

The company said in its filing to the BSE cited a clause in its agreement with lessors that the company is to pay lease rentals only in the event of breach of certain contractual obligations in future.

“The company has sought extension of time to meet a part of its obligations which were to be fulfilled by March 31, 2012, which it is hopeful of receiving. No provision is considered necessary as the Company is confident of meeting the relevant obligations,” it added.

Use fees

The use fees (hourly and cyclical utilisation charge) paid in respect of these leased assets have also been treated as maintenance reserves.

“The company is taking steps to formalise this understanding with the relevant lessors. In terms of the company's accounting policy, these use fees are initially included under loans and advances, and are expensed out to the profit and loss account of the time of incurrence of major maintenance expenditure/termination of agreements,” it observed.

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3477791.ece

Foreign airlines tentatively interested in SpiceJet: CEO

Till FDI is approved we cannot take it forward. The interest is from Gulf and South-East Asia which will make the most sense. — Mr Neil Mills, CEO of SpiceJet

A day after SpiceJet reported a loss of Rs 249 crore for the quarter ended March31, 2012, the airline's Chief Executive Officer, Mr Neil Mills, spoke to Business Line on a host of issues including what impacted the financials of the airline

Excerpts from the interview:

What has been the single largest contributor to an almost five-fold increase in losses?

There is obviously the on going fuel cost. But the proportion of fuel cost in this quarter is actually lower as compared to the last quarter. However, it is still 55 per cent of revenue even though that is better than the 64 per cent for the full year.

The depreciation in the Rupee must have hit you badly.

Unfortunately, a lot of our costs are dollar denominated and the revenue is Rupee denominated. So there is a natural imbalance. The weakening of the Rupee has had an impact on our operating costs. However, since the quarter ended about two months ago revenue has certainly improved from where it was.

How much has the revenue increased?

About 10 per cent.

Has this been because of increase in fares?

Fares have had to be increased in order to offset some of the increase in operating costs, particularly on fuel. But this increase in fares has been supply and demand driven. Unless oil and Rupee significantly strengthen, we will have no choice but for this to continue. What we have been doing is to stabilise the fares at the current level. That is where they are today (and not where they were at the end of March) and are at least holding at that level going forward.

How long is forward?

That depends on how long fuel prices remain where they are.

Will importing fuel directly as you plan make a difference to fare levels?

Ultimately it will but not a huge proportion. We will have to see how successful the import of fuel will be although we think it will be very successful. We are planning the first physical import of fuel in the beginning of July.

What percentage of the ATF uplift will be imported?

That really depends on how successful the first import is. Let us see what we are going to save. We are confident that it will become a large proportion of our total fuel.

Where are you going to import it from and who are your importers?

We have not finalised that contract at this stage. It will take a few weeks. Getting storage in India has been the biggest challenge. But we have pretty much got it sorted out now.

Will imported fuel be available at all stations?

First, we will do it at a few target stations and then roll it through the network.

A full year net loss of Rs 605 crore. How does it look going forward?

A: It looks positive, that is why we continue to grow within India. We certainly believe in the long term growth story.

Are you looking to return some foreign pilots?

No, that is not us. We are not looking at doing anything drastic. We will do things in an orderly and controlled way.

What does controlled way mean?

We have renegotiated a couple of our contracts for about Rs 20 crore of our current costs. It is a one-off cost where we are trying to get a better cost base going forward. We have also signed a long term engine agreement.

Is there investor interest in the airline?

We have been talking to a lot of potential investors. SpiceJet has a lot of interest from third party investors who are mostly international.

Have any airlines shown an interest in SpiceJet?

They have shown a speculative interest. But till FDI is approved we cannot take it forward. The interest is from Gulf and South-East Asia which will make the most sense.

Are you looking to add to your fleet during the year?

We added another aircraft last night. We will finalise how many we intend to take in during the year in a couple of weeks. Six to seven aircraft will probably be added this year.

Any date for starting new international destinations for which the Government has given permission?

A: As soon as we get permission from foreign countries. It took 15 months to receive permission from India so we need to give foreign countries a little bit of time to do their bit.

Will you look to add more city pairs within the country?

We are continuously growing. We have grown by 10 new airports in the last 12months.

The Budget opened the ECB window. Will you tap into that?

ECB is something that we will look at but it is not particularly attractive at this point in time. How can you borrow in dollars with the Rupee being as volatile as it is?

What has been the impact of Delhi airport raising its charges?

A: We will try and pass as much as possible to the customer but it will make us relook at how many aircraft we base in Delhi. Currently, there are 11 machines in Delhi. We have not taken a decision on where we will base the aircraft.

http://www.thehindubusinessline.com/companies/article3477143.ece