KFA's total loss mounts to Rs 6,213 cr
Can you think of a business where a company loses Rs 2.30 on every 1 rupee of revenue it earns? No prize for guessing: the industry is India’s domestic aviation and the company — Kingfisher Airlines (KFA).
On Thursday, KFA reported that in the quarter ending March 31, 2012 (Q4) it earned revenue of Rs 741.28 crore while it lost Rs 1,704.58 crore (before write back of taxes), resulting in an absurd situation where the Vijay Mallya run airline’s loss was 2.30 times of the revenue. Total loss at the end of 2011-12 was at Rs 6,213 crore.
The Q4 was indeed very tough as KFA was forced to impose severe cuts in number of lights due to its fleet reconfiguration exercise and was also plagued by unscheduled cancellation due to pilots’ strike and non-payment of dues to some suppliers. Jet Airways too reported a 140 per cent jump in Q4 net loss to Rs 298.12 crore due to very high fuel prices and lower occupancy.
Explaining the unusually high losses, KFA in a press release said that apart from higher fuel cost there was an incremental one-time loss of Rs 743 crore due to early re-delivery of the aircraft and Rs 338 crore due to restructuring costs.
“The Indian aviation industry is confronted with an unprecedented, tough operating environment — intensified by consistently high fuel prices and the depreciating Indian rupee. Fuel prices have increased by over 40 per cent over last year compounded by the weakened rupee,” a KFA release said.
Creation of higher seat capacity in 2011-12 in relation to demand — demand grew 13 per cent but capacity grew 17 per cent — also contributed to the industry’s problem of uneconomic fares.
Things will become worse with the country’s economic growth slowing down. The domestic aviation industry in India estimated to have piled up total loss of Rs 12,000 crore in 2011-12. In the FY 2011-12, KFA’s net loss was Rs 3,446.09 crore, more than double of Rs 1,520.78 crore it lost in the previous year. Its total income too dropped to Rs 5,493.40 crore in 2011-12 against Rs 6,233.37 crore.
Thus, at the end of March 31, 2012 the perpetually loss-making company has piled up an accumulated loss of Rs 6,213.14 crore or 5.5 times of its share capital of Rs 1,130.75 crore. But the beauty of doing business in India is that despite such humongous losses Kingfisher is still flying, helped, of course, with funds from lenders.
As on March 31, 2012, KFA’s long term borrowings to banks and others was Rs 5,719 crore. Since its other liabilities in the form of short term borrowings, trade payables and others add up to another Rs 8,443 crore, the company had a whopping total liability of Rs 14,162 crore.
As KFA’s lead banker State Bank of India’s Chairman Pratip Chaudhuri has recently said that banks won’t lend any more money, industry watchers are wondering how long Mallya can pilot his debt-ridden airline.