KFA posts Rs 822 cr loss, auditors sceptical

KFA posts Rs 822 cr loss, auditors sceptical

 Losses at Vijay Mallya’s grounded airline Kingfisher Airlines (KFA) have widened over the past year. The airline, which has suspended operations since October last year, on Wednesday reported net losses of Rs 822.42 crore for the third quarter ended December 31, 2013. It had reported a loss of Rs 755.17 crore a year earlier.

However, auditors of the airline B K Ramadhyani & Co, said that the accounting method used by the airline to calculate costs incurred on maintenance and repairs of aircraft was "not in accordance with generally accepted accounting standards prevalent in India.

For the nine-month period ended December 31, 2013, losses would have been lower at Rs 2,636 crore, the auditors said. KFA, during this period, reported net loss of Rs 2,694.89 crore. Besides, the company's reserves as on March 31, 2013, would have been debit of Rs 14,340 crore as against the reported figure of debit of Rs 14,281 crore, the auditors said.

The auditors have drawn attention to Kingfisher's financial results being prepared on a going concern basis, notwithstanding the fact that the company's net worth is eroded, the scheduled air operator's permit issued by the DGCA has lapsed, the Karnataka High Court having admitted petitions by the consortium of bankers and one unsecured creditor for winding up of the company and several other winding-up petitions pending before the court.

"These events cast significant doubt on the ability of the company to continue as a going concern," the auditor report noted.

"Estimates of number of unflown tickets and their average value, based on which management has reportedly estimated the amount of unearned revenue, not being drawn from accounting records, could not be reviewed by us," the review report further pointed out.

With the airline reeling under debts of roughly Rs 8,000 crore and struggling to play salaries of its employees, sales remained nil during the quarter, similar to a year ago. Debts are primarily owned to banks, airports and by way of outstanding tax dues. The airline has never reported profits in the eight years of its operations.

Finance costs of Kingfisher during the third reporting quarter stood at Rs 350.99 crore, against Rs 401.26 crore in the corresponding quarter of the previous year.

Redelivery cost rose 45.83 per cent to Rs 400.73 crore, against Rs 274.80 crore for the comparable quarter a year ago.

The airline sounded out the Civil Aviation Ministry for renewal of its operating license last year after the license expired, but the latter’s response was clearly negative.

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