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Wednesday, 16 November 2011 01:33 - - {{hitsCtrl.values.hits}}
MUMBAI (Reuters): India’s cash-strapped Kingfisher Airlines, which has cancelled scores of flights in recent weeks, cannot afford to fly heavily loss-making routes, its chairman said on Tuesday.
“We cannot, as a private company, fly routes that are heavily loss-making,” Vijay Mallya told reporters. Earlier on Tuesday, Kingfisher reported a doubling of its loss in the fiscal second quarter on higher fuel prices and operating costs, amid investor worries about its future, and said its net worth has been eroded.
Mallaya also said Kingfisher Airlines has not defaulted on any loan and all its accounts with banks are standard. He added airline hasn’t been formally asked by banks to bring in fresh equity.
The carrier has become one of the main casualties of high fuel costs and a fierce price war between a handful of airlines which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.
The company has not asked for any debt restructuring or additional funds, State Bank of India chairman Pratip Chaudhuri told reporters earlier on Tuesday.
Cash-strapped Kingfisher Airlines on Tuesday reported a doubling of its loss in the fiscal second quarter on higher fuel prices and operating costs, amid investor worries about its future. The company said it has suffered “substantial losses” and its net worth has been eroded.
Kingfisher has been asked by its creditors to raise $160 million in equity and the carrier is considering a proposal to sell real estate to help pave the way for a debt restructuring, a banker said on Monday. The carrier’s net loss in the quarter ended September 30 rose to Rs. 469 crore ($93 million) from Rs. 231 crore in the year-ago period, the company said in a statement to the stock exchanges. Aircraft fuel expenses in the quarter rose 70 per cent to Rs. 817 crore, it said. The carrier has become one of the main casualties of high fuel costs and a fierce price war between a handful of airlines which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future. Banks will take control of the cash flow of Kingfisher Airlines - a harsh step that lenders rarely take to protect their exposure. They will put in place a mechanism where the airline’s earnings will flow into one bank account that will be closely tracked to avert loan defaults. The decision was taken by the lenders at a hurriedly called meeting last week as the Vijay Mallya promoted airline hit the headlines after it cancelled 200 flights and sought government help. “This industry needs some structural reforms. The impractical competition among players has driven down ticket prices and the high fuel cost is also hitting very badly,” said Sharan Lillaney, an airline analyst with Angel Broking. Kingfisher said it is not worried about its long-term viability but was considering a proposal to sell real estate to help pave the way for a debt restructuring.
The carrier, which has never turned a profit, recently announced plans to exit the low-cost segment, a move that puzzled some observers given the price-sensitive market.
