Kingfisher Airlines posts record Q2 loss

Agencies Posted: Nov 08, 2012 at 0920 hrs
Mumbai Concerns over the future of the debt-ridden Kingfisher Airlines intensified on Thursday after the grounded carrier provided no concrete recovery plan even as a deadline to raise cash loomed large.

Kingfisher, grounded for more than a month after a violent staff protest and concerns about safety, widened its quarterly loss from a year ago as a curtailed schedule meant sharply lower revenue.

The carrier controlled by liquor tycoon Vijay Mallya, once India's second-largest by market share, has never turned a profit since its founding in 2005 and is saddled with roughly $2.5 billion in debt, according to one estimate.

The airline posted a record net loss of 7.54 billion Indian rupees ($139.46 million) for the September quarter, compared with a loss of 4.69 billion rupees a year earlier. Revenue declined 87 percent to 2 billion rupees from 15.5 billion rupees a year ago. The carrier said in a statement that it was preparing a comprehensive plan to re-start operations that would be shared with the airline regulator and bankers but did not say when it would be available.

Some analysts doubt Kingfisher will fly again and the company's failure to produce a concrete recovery plan on Thursday underlined concerns about its viability. Local media had reported that Kingfisher may present a rescue plan this week.

Creditors have set a Nov. 30 deadline for it to bring in fresh equity or an investor, the chairman of State Bank of India , its lead lender, told Reuters. He did not say what would happen if the demand was not met.

“It looks very difficult”, said a Mumbai-based equity analyst who did not wish to be identified because he does not cover the company anymore. “They have like 20 days to raise a billion dollars. I don't know how they can do that in 20 days, they haven't managed to do that in a year. “

Kingfisher has been scrambling without success to find fresh investment. No global airline has publicly expressed an interest in buying a stake.

The Centre for Asia Pacific Aviation has said a fully funded turnaround for Kingfisher would cost at least $1 billion.

This week, a top government official said India would not renew the airline's licence if it failed to provide a turnaround plan by the end of December.

SBI chairman Pratip Chaudhuri said on Wednesday Kingfisher needs to raise or commit at least $1 billion by Nov. 30, although lenders are not looking to liquidate the carrier's assets as of now.

“We are slightly disappointed with the pace at which their capital raising plan is going on. We have made it very clear to the company that the company has no justification or no room for debt. They have to give equity”, Chaudhuri told reporters.

“We would like to see some tangible evidence, some forward movement. Unfortunately till date, we have not seen anything very significant”, he said.

Kingfisher shares have fallen around 40 percent this year and were trading at 12.5 rupees in early trade on Thursday, a tiny fraction of their all-time peak above 334 rupees in late 2007.

Kingfisher Q2 loss widens to Rs 754 cr

Mumbai,(PTI): Debt-ridden Kingfisher Airlines today reported net loss of Rs 754 crore for the July-September quarter, a sharp increase from Rs 469 crore in the year-ago period, and said it is working on a plan to resume services.

The revenue plunged to Rs 200 crore during its second quarter of this fiscal from Rs 1,553 crore in the same period last year because of disruption in operations and eventual suspension of its licence by aviation regulator DGCA.

Even as the company's expenses declined across various heads, the firm suffered huge restructuring cost. Its tax expenses also rose sharply.

Announcing the result, the carrier said it is in discussions with various stakeholders to ensure that there are no future disruptions and expects to resume operations in the near future.

"Kingfisher Airlines is preparing a comprehensive plan for re-start of operations which will be shared with the DGCA and bankers," the carrier said in a BSE filing.

Shares of the company were trading at Rs 12.85, up 0.16 per cent on the BSE at 1025 hrs.

The carrier is already saddled with accumulated loss of Rs 8,000 crore besides a debt burden of over Rs 7,524 crore, a large part of which has not been serviced.

The Directorate General of Civil Aviation (DGCA) had recently suspended the flying licence of Kingfisher following the airline's failure to come up with a viable plan of financial and operational revival.

It faces the risk of losing its licence if a revival plan is not submitted by next month, while bankers are working on plans to handle large scale defaults by the airline.

"After adjusting for finance cost of Rs 401 crore, a one-time cost of Rs 448 crore due to re-delivery of aircraft and restructuring, idle costs and taxes, the net loss was Rs 754 crore," the Kingfisher filing said.

The company has been in a 'holding pattern', operating a limited flight schedule since March this year. Holding pattern in aviation terminology means when an aircraft has to take several rounds in the air before landing.

"During the quarter under review, the company's difficult cash flow situation continued due to various factors resulting inter alia in delay of salaries and a curtailed operational fleet. This resulted in a certain section of the employees resorting to flash strikes which resulted in disruption of the company's scheduled operations," the company said.

Kingfisher was forced to declare a partial lockout which resulted in a show cause notice by the DGCA.

The DGCA has temporarily suspended the company's Scheduled Air Operator's Permit as a result of frequent cancellations of flight due to employee unrest till such time it submits a concrete and reliable plan ensuring safe, reliable, efficient and sustainable Scheduled Air Transport Services, Kingfisher said.

The company has settled its disputes with the employees who have all returned to work and is in the process of submitting the revival plan to DGCA.

Kingfisher said it is confident that it will be able to have the suspension of the operating permit revoked and resume operations at the earliest.

Restructuring, idle costs represent fixed cost associated with curtailment of operations during the period relating to aircraft on ground.

The details of such costs shown separately from their natural heads constitutes for the quarter ended September 30, 2012, of lease rentals Rs 16,559.47 lakh, employee costs Rs 4,200 lakh and other operating expenses Rs 711.86 lakh, the filing noted.

In terms of agreement entered into with a certain party in respect of assets taken on lease, 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 September 30, 2012, which it is hopeful of receiving.

It further said that no provision is considered necessary as the company is confident of meeting the relevant obligations.

Additionally, the use fees (hourly and cyclical utilisation charge) paid in respect of these leased assets are, in accordance with the company's understanding, treated as maintenance reserves.

In terms of the company's accounting policy, the use fee is initially included under loans and advances and expensed out to the profit and loss account at the time of inccurence of major maintenance expenditure, termination of agreements.

In respect of certain agreements entered into for lease of aircrafts prior to March 31, 2007, the company's applications for exemption under the Income Tax Act has been rejected by the Central Board of Direct Taxes and the High Court of Delhi.

The company is in the process of filing a special leave petition to the Supreme Court over the order of the court confirming the rejection of exemption along with a petition for condonation of delay in filing the SLP.

The management believes, based on internal assessments, that the probability of an ultimate adverse decision and outflow of resources of the company is not probable and accordingly, no provision for the resultant tax liability is considered necessary, the filing said.

The company has terminated certain agreements entered into with parties as a cost rationalisation measure. Certain parties have also terminated the agreements entered into with the company in view of defaults by it, it added.

Kingfisher is in discussion with relevant parties to finalise the amount of compensation and other costs, if any payable by it, as well as to persuade the parties to desist from such cancellations. The same will be accounted on final determination of the matter.

In the opinion of the management, this amount is not likely to be material.

Pursuant to the directives issued by the consortium bankers, pursuant to RBI guidelines, no provision has been made in the books of accounts for commission payable in respect of guarantees issued by the guarantors to the company's bankers estimated at Rs 2,536.20 lakh for the period July-September of this year.

The company has incurred substantial losses and its net worth has been eroded.

With regard to capital raising plans, the company said it has sought financial support from its group and has requested its bankers for further credit facilities.

However, no adjustments have been made in financials because of its planned aircraft reconfiguration and the revival plan proposed to be submitted to the DGCA for restoration of its license.

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