Kingfisher Airlines, which doubled its losses in the July-September quarter to R468.66 crore from R230.81 crore in the year-ago period, is seeking help from banks to reduce its debt and stay afloat. ?We have asked banks to give letters of credit to our lessors to cut down high-cost debt,? Ravi Nedungadi, chief financial officer of parent UB Group, said on Tuesday.
Chairman Vijay Mallya said the airline has requested additional working capital from banks. ?Kingfisher Airlines has not asked for equity infusion from the government,? he stressed. ?All we have asked for is an increase in our working capital borrowings quota and find a way to reduce interest costs.?
The beleaguered airline?s Ebitda (earnings before interest, tax, depreciation and amortisation) margin came in at a negative 16.7% in the September quarter, leading to an operating loss of R271 crore against a R55-crore profit in the same quarter last year.
Recent media reports had said that some aircraft leasing companies were planning to take back aircraft they had given to the airline.
Kingfisher?s losses in the first half of 2011-12 amount to R732.21 crore on the back of a R1,027.39 crore loss in the year to March 2011. It cancelled nearly 200 flights last week to cut costs.
Mallya claimed some Indian investors had approached Kingfisher Airlines, India’s second largest airline by passengers carried, with a proposal to purchase a stake. ?The truth is, I have been approached by some people keen to invest in the airline,? Mallya said at a press conference. However, he declined to reply to a specific query on whether it was the Tata Group or Reliance Industries which proposed to invest.
?Tata Group denies any move to invest in Kingfisher,? a Tata spokesperson said in response to an email query.
The Kingfisher management had vowed to bring in more equity by issuing global depository receipts, but there has been little progress on this front. Earlier this year, the company’s board cleared raising up to Rs 2,000 crore through a preferential share issue. ?We are pursuing all possible means of raising money,? said Mallya, whose flagship liquor company UB Spirits and associates invested Rs 780 crore in Kingfisher Airlines last year. ?At this point of time, this is all I can say,? he said. The liquor baron is trying to rescue his airline from a financial crisis as it finds tough to pay for aviation turbine fuel on time and is unable to control widening losses.
The airline owes banks close to Rs 7,500 crore. In April, 13 lenders had converted around Rs 700 crore of Kingfisher loans into a combined equity stake of 23.37%, leaving State Bank of India with 5.68% and ICICI Bank with 5.3%.
Industry sources say the government may push through a a policy change allowing foreign airlines to invest in domestic carriers. However, there appears to be some difference of opinion between DIPP which has suggested that the stake be restricted to 26% and the civil aviation ministry which feels it should be 24%. An an inter-ministerial group meeting is expected to be held soon before the proposal goes to the Cabinet. Mallya supported allowing foreign carriers to invest in Indian airlines. ?I am an avid supporter of FDI and do not see any reason why FDI from foreign airlines shouldn?t be allowed,? he said. British Airways is helping Mallya to join the oneworld alliance.
Indian carriers have reported losses in the second quarter, as aviation turbine fuel prices keep rising. Airlines spend 40% of their costs to buy jet fuel. ATF prices are rising 50% every year. Kingfisher’s quarterly fuel bill jumped to Rs 816.81 crore from Rs 479.88 crore in the year ago period. ?There is little the airlines can do,? said an analyst at an international brokerage. ?It is time the government stepped in with policy changes on ATF taxation and FDI in aviation to help the industry.?
The airline wants lenders to extend working capital and the government to reduce ATF prices, permit fuel import and cut down unprofitable routes. It is also streamlining its operations by dropping unprofitable routes and adding more seats to many planes to increase yield. Analysts say the restructuring may take time to reap dividends.
?Benefits of route rationalisation will come with a lag effect,? said a consultant with a global accounting and consultancy firm. He cannot be quoted as he cannot comment on specific airlines. ?We will have to see how much of a savings KFA gets from importing fuel because logistics is an issue it will have to tackle.?