Bloomberg News

Kingfisher Airlines Posts Wider Loss on India Fuel Costs

February 16, 2012

(Updates with closing share price in fifth paragraph)

Feb. 16 (Bloomberg) -- Kingfisher Airlines Ltd., the Indian carrier controlled by billionaire Vijay Mallya, posted a wider third-quarter loss as fuel costs surged and the company cut flights amid a cash shortage.

The net loss was 4.44 billion rupees ($89 million) in the three months ended Dec. 31, compared with 2.54 billion rupees a year earlier, Bangalore-based Kingfisher said in a statement dated yesterday. Operating revenue fell 19 percent to 13.4 billion rupees, the airline said.

Kingfisher joins Jet Airways (India) Ltd. and SpiceJet Ltd. in extending losses as they fail to turn rising travel demand into profits because of fuel expenses and a price war. India may soon allow foreign airlines to buy stakes in local carriers as they struggle for financing to expand in a market where domestic traffic is forecast to surge fourfold by 2020.

“Mallya’s losing money hand over fist,” said Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. in Mumbai. “The situation is not going to improve quickly,” as fuel prices remain high.

Kingfisher rose 0.6 percent to 27 rupees at close of Mumbai trading. The benchmark BSE India Sensitive Index declined 0.3 percent. The airline dropped 68 percent last year.

“Steep depreciation of the Indian rupee, coupled with consistently high crude oil prices has led a challenging quarter for the Indian aviation industry,” Kingfisher said in the statement.

Fuel, Rupee

The carrier’s fuel expenses rose 37 percent in the quarter from a year earlier. The rupee fell 7.7 percent in the period, and touched a record low of 54.305 per dollar on Dec. 15, according to data compiled by Bloomberg.

Jet Airways, India’s biggest carrier, reported a fourth straight quarterly loss last month after jet-fuel costs rose 60 percent, eroding gains from carrying more passengers. SpiceJet, India’s only listed discount carrier, also attributed its third- quarter loss to higher fuel costs.

Indian Oil Corp., the nation’s largest refiner, cut the price of jet fuel in Mumbai to 63,499 rupees a kiloliter starting today from 63,864.31 rupees a kiloliter as of Feb. 1, according to the company’s website.

Kingfisher, whose market share slipped to fifth in December from second in October as it cut flights and scrapped low-cost services as part of a turnaround plan, carried 2.63 million passengers during the quarter, 15 percent fewer than the year- earlier period.

A380s Delayed

The carrier has grounded 12 of its existing 27 Avions de Transport Regional planes and delayed Airbus SAS A380 deliveries beyond 2016.

ATR, a maker of turboprop aircraft, said last month it canceled a 38-plane order from Kingfisher after the carrier missed payments. State Bank of India, the nation’s largest, will lend to Kingfisher only after the company pays dues on existing loans, Chairman Pratip Chaudhuri said Jan. 17.

The bank and other lenders last year converted 13 billion rupees of existing Kingfisher debt into preferred shares. They also granted as much as 12.1 billion rupees of new loans to the carrier.

The airline has pledged its brand, office furniture and other assets against a debt of about $1.3 billion. Kingfisher said Jan. 19 it’s in talks with potential investors including SC Lowy Financial Services.

Foreign Airlines

India’s aviation and finance ministries recommended allowing overseas airlines to buy as much as 49 percent stake in local carriers last month. The proposal is pending final approval from cabinet. Non-airline investors from overseas are already allowed to hold as much as 49 percent.

Indian carriers’ debt may reach close to $20 billion in the year ending March 31, the aviation ministry said in a December report to the Planning Commission, an agency that designs five- year economic and social programs. Working capital loans and dues to airport operators and fuel companies account for half of this amount, according to the report.

Kingfisher had a fleet of 64 planes ranging from ATR turboprops to Airbus A330s as of Dec. 31, according to the company statement.

--Editors: Vipin V. Nair, Garry Smith

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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