Recast, expansion to help Kingfisher stay afloat

The change of fortunes for the airlines industry in the past one-and-ahalf years seems to have evaded Bangalore-based Kingfisher Airlines. The company continues to be beset with problems that have squeezed its earnings and left it lossmaking. The December 2010 quarter proved to be its sixteenth consecutive quarter of losses, as the company reported a net loss of Rs 252 crore, a bit lower than the year ago number.
In spite of its recent debt recast, sustainable growth will depend on the success of its equity infusion plan. The company’s most critical problem is its debt, which is mammoth and still rising. During the past oneand-a-half year, for example, the interest payment took away an average 21% of its revenues, which was sub-stantially higher compared with less than 10% for its peers like Jet Air-ways or SpiceJet.
Kingfisher Airlines has been making cash losses year after year, which has resulted in rising loans to fund losses. The problem of perennial losses has been, no doubt, its origin in the company’s operational problems. For the past six quarters, 14 out of 66 its aircraft remained out of action — nine on account of technical problems and five due to company’s inability to pay lease rentals.
This meant a huge loss of opportunity as the industry’s growth momentum picked up. This also resulted in the company losing its market share to smaller players, like Indigo.
05/02/11 Rajesh Naidu/Economic Times

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Categories: Kingfisher Feb 2011