29-Sep-2011 8:54 AM

Kingfisher Airlines chairman 'optimistic' about future; sees strong aviation demand

Kingfisher Airlines and UB Group chairman Vijay Mallya, in a statement to shareholders, stated (28-Sep-2011) he is optimistic about the outlook for the carrier and sought to address the "sensational" media reports about the carrier's financial state and future, stating: "All is not doom and gloom as people like to report" (IANS/PTI/AFP/The Hindu Business Line/Business Standard/NDTV/Live Mint/Hindustan Times/Reuters/Manorama Online/DHNS/Rediff/DNA India/Economic Times, 28-Sep-2011). Key details include:

  • Aviation demand: Dr Mallya stated aviation demand remains strong and Kingfisher is still the single largest airline in India with a market share of approximately 20%;
  • Financial performance: During the quarter ended Jun-2011, Kingfisher "delivered a better financial performance than other listed Indian carriers". On domestic operations, Kingfisher reported an EBITDAR margin of 15.4% which compares favourably with 6.4% and 7.2% reported by others, Dr Mallya said;
  • Debt recast package: Kingfisher implemented a debt recast package during the year under review pursuant to which loans from bankers in excess of INR13 billion (USD266 million) and funds from promoters of approximately INR7.45 billion (USD152 million) were converted into share capital. The interest rate on the recast loans was lowered to 11% and the period of repayment was extended to nine years;
  • Raising fresh capital: Kingfisher stated it has been working and continues to work aggressively to raise fresh capital. "As you would appreciate, in a volatile global economic environment and with oil prices as high as they have been, it is not an easy task," Dr Mallya said;
  • Fleet configuration: Kingfisher is in the process of reconfiguring its aircraft. This reconfiguration will increase capacity by 10% at minimal incremental cost". "With Kingfisher’s domestic economy load factors running in the mid-80s, this additional capacity will result in significantly improved revenues," Dr Mallya said;
  • Aviation turbine fuel (ATF): The high cost of ATF coupled with a weakening rupee is the biggest challenge the whole aviation industry in India is currently dealing;
  • Support: Dr Mallya stated UB Group is committed to supporting the carrier and is working out ways of further cutting debt. “I have also personally stepped in to provide a third level of comfort to the lenders, who have been extremely supportive of Kingfisher,” he said, continuing: “I too have given my personal comfort to the lenders over and above the securities provided by the company and the additional collateral of United Breweries​ Holdings Ltd (UBHL) guarantees". [more - original PR]

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