Kingfisher to quit low cost aviation business: Vijay Mallya [Archive]

cyrilroy21

28th Sep 2011, 09:03

Kingfisher Airlines today said it will stop operations of its low cost airlines Kingfisher Red. Announcing this decision, Chairman Vijay Mallaya said, "We don’t believe in low cost operations anymore.”

Mr Mallaya had started Kingfisher Red after buying out Deccan Airlines.

The cash strapped airline has never reported profits since its launch in 2006. In the last quarter, the airline had reported losses of Rs. 264 crore against losses of Rs. 187 crore in the corresponding quarter of last year. The company has huge debt levels, which currently stands at Rs. 6,000 crore.
Analysts said this was a strange move because 70 per cent of the company's business came from its low cost division. However, Kingfisher's stocks rose after the announcement.

Kingfisher has a market share of nearly 20 per cent.

Vijay Mallaya grounds low-cost carrier Kingfisher Red - NDTV Profit (http://profit.ndtv.com/news/show/vijay-mallaya-grounds-low-cost-carrier-kingfisher-red-180433)

cyrilroy21

28th Sep 2011, 09:06

NEW DELHI: Kingfisher Airlines on Wednesday said that it will quit its low cost aviation business, Kingfisher Red. Its chairman, Vijay Mallya said that the segment was too competitive and there are enough passengers for a full service operation.

"Kingfisher Airlines is working with a consortium of banks to further reduce interest costs and raise working capital as the carrier looks to restructure its fleet by selling and leasing back some of its aircraft to lower debt," Mallya said.

The airline, which operates 370 flights every day, expects to increase its capacity by 10 percent by reconfiguring its aircraft which will significantly improve revenues, he said.

"The high cost of ATF (aviation turbine fuel) coupled with a weakening rupee is the biggest challenge that the whole aviation industry in India is currently dealing with and we are no exception," Mallya said in a speech at the airline's annual shareholders' meeting. He said that the company is currently buying jet fuel from Reliance.

The airline's auditors had said in the company's annual report for the fiscal year that ended March 31, that it needs capital infusion to remain viable. The auditors B.K. Ramadhyani & Co also noted, that the airline's financial statements had "been prepared on a going concern basis, notwithstanding the fact that its net worth is completely eroded."

The airline also plans to convert part of its rupee loans into low-cost forex loans based on existing cash flows, he said. Kingfisher had planned to raise $250-$350 million through an issue of global depositary receipts in January, but no deal has been forthcoming.

The company also tried to bring in private equity investment in 2008 and 2009, but was not successful.

In late August, Kingfisher said its board approved a rights issue of shares to raise up to Rs 2,000 crore.

The airline has not reported profit since going public in 2008 through an acquisition. It has posted cumulative losses since then of Rs 4,283 crore.

Earlier this year, Kingfisher cut its debt through a restructuring by issuing shares to 14 banks. Now, the banks including State Bank of India and ICICI Bank together own 29 percent of Kingfisher.

This exercise converted almost Rs 1,300 crore of loans into equity and its debt now stands at about Rs 6,000 crore.

Funds worth Rs 745 crore, infused by founders, were also converted into share capital, Mallya said.

Shares of Kingfisher Airlines have lost about 63 percent in value in a year, with the company suffering losses on high oil prices and intense domestic competition.

Kingfisher stock was up 1% to Rs 25.30 at 2:18PM on the BSE.

Kingfisher to quit low cost aviation business: Vijay Mallya - The Economic Times (http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/kingfisher-to-quit-low-cost-aviation-business-vijay-mallya/articleshow/10156757.cms)