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India's Kingfisher Airlines reports biggest-ever loss

Publication Date : 09-11-2012


India's biggest lender State Bank of India's warning to Kingfisher Airlines (KFA) to raise $1 billion fresh capital before November 30 if the money-strapped company wants its debts to be restructured did not come a day sooner.

Apparently it was timed for the day -- yesterday -- when the private carrier declared its biggest-ever loss of 7.54 billion rupees (US$138.79 million) for the July-September 2012 quarter which in aviation sector raises serious doubts whether Vijay Mallya promoted airline would be able to meet the deadline set by a consortium of 17 lenders headed by SBI to infuse fresh capital.

SBI chairman Pratip Choudhuri yesterday said airline business was a capital intensive one.

"We (the lenders) are not concerned from where the capital comes -- whether from UB group companies, foreign airlines or Indians residing abroad. If KFA manages to rise more than $1 billion it would be better. When we ask the KFA to manage $1 billion in fresh capital we do not say so by putting a gun on its head," he added.

The bankers have already disapproved the slow pace of KFA's capital raising programme.

However, in a statement issued today with the quarterly results, Mallya clarified: "The airline is in discussion with various stakeholders to ensure there are no further disruptions as KFA expects to resume operation in the near future. With regard to recap plan, KFA is looking forward to group companies' support besides requesting its bankers for further credit facility. The airline is planning reconfiguration of aircraft so that a revival proposal to resume flights is submitted to the Director General of Civil Aviation."

The KFA chairman hopes the private carrier will be able to meet all terms and conditions within the set deadline so that the licence to fly is not completely revoked.

The KFA not only reported a huge quarterly loss, its revenue for the same quarter declined sharply to 15.53 billion rupees against 2 billion rupees for the corresponding period previous year. The mounting financial woes have been attributed to high financial cost, re-delivery of planes and losses accruing from the grounding of its fleet. The cumulative losses are now at 80 billion rupees in addition to a debt burden of 75.25 billion rupees.

When KFA suspended its operations on the last day of September its daily operational losses were about 80 million rupees.

The private carrier launched in 2005 is currently out of flying business because the DGCA has suspended its licence on various considerations. The management so far has only succeeded in winning back the allegiance of striking pilots, engineers and ground staff by offering them three months' salaries in as many installment before Diwali.

The strike has been withdrawn but there are no planes ready to take off as the company now has to comply with the demands of the regulator DGCA and 17 lenders. The salary arrears were paid after the lenders released 650 million rupees from the escrow account.

From what the SBI chairman told reporters today, it appears the lenders too have not worked on an option to recover their finances from the beleaguered airline. There have been reports about banks selling Mallya's villas in Goa and Kingfisher House in Mumbai to partially recover their debts.

KFA's largest borrowing came from SBI which gave its loans worth 15 billion rupees.

PTI adds: Flagging concern over the financials of Kingfisher, its auditors have said the carrier's second quarter net loss would have been much higher, at about 10.32 billion rupees, had it followed “generally accepted accounting standards” for certain income and expenses.

Besides, its "reserves and surplus" would have been a debit of 121.55 billion rupees as on September 30, as against a debit of 73.39 billion rupees reported by the company, the auditors said in their "limited review report".

*US$1= 54.3 rupees


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