Mumbai: Kingfisher Airlines Ltd’s third-quarter loss widened as it cut flights during the peak season and operating costs rose on high jet fuel prices and a steep depreciation of the rupee against the dollar.
The Mumbai-based airline reported a loss of Rs444.26 crore in the three months ended 31 December compared with a loss of Rs253.69 crore in the year earlier. Sales declined by 15.2% to Rs1,342.32 crore.
A senior analyst at a domestic brokerage said the actual loss of the airline for the December quarter was around Rs657.64 crore as it has taken a tax credit of Rs213.37 crore. “It is unlikely to realize the tax credit as the airline is not in a position to make a profit in the imminent future,” he said. B.K. Ramadhyani and Co., the airline’s auditor, has also noted the fact in its limited review report.
In an emailed presentation sent at midnight Wednesday, Kingfisher Airlines said domestic capacity rose 17% in the third quarter from a year earlier, outpacing the 12% growth in domestic demand, making it difficult for carriers to raise fares.
The airline has been cancelling more than 50 flights a day to cope with a cash crunch. These have come during the December quarter, which is considered peak season for the industry. The airline reported a 13.4% drop in departures during the December quarter to 26,757 from 30,883 in the year earlier.
Rashesh Shah, an analyst at domestic brokerage ICICI Securities Ltd, who tracks Kingfisher Airlines stock, said the earnings were in line with expectations. “We were expecting a 15% decline in revenue because of flight cancellations. But the surprise is in the form of other income. The airline has reported a huge jump in other income without explaining it,” Shah said.
The company’s other income jumped to Rs205.09 crore in the December quarter from Rs17.28 crore in the year earlier.
Shares of Kingfisher Airlines rose 0.75% to end trading at Rs26.95 on BSE on Thursday, outperforming the benchmark Sensex’s 0.27% drop.
Other publicly traded airlines in the country, too, have reported losses. The nation’s second-largest low-fare airline SpiceJet Ltd reported a Rs39.26 crore loss in the quarter ended 31 December compared with a profit of Rs94.45 crore in the year earlier. Jet Airways (India) Ltd, the country’s largest airline by passengers flown, posted a fourth straight quarterly loss in the December quarter. The Naresh Goyal-controlled airline reported a loss of Rs101.22 crore in the quarter ended 31 December against a profit of Rs118.23 crore in the year earlier.
Jet fuel cost was one of the main reasons for the losses. Kingfisher Airlines’ jet fuel cost soared 36.8% to Rs738.81 crore in the December quarter.
“The company has incurred substantial losses and its net worth has been eroded. However, having regard to capital-raising plans, group support, the request made by the company to its bankers for further credit facilities, planned reconfiguration of aircraft and other factors, these interim financial statements have been prepared on the basis that the company is a going concern and that no adjustments are required to the carrying value of assets and liabilities,” the airline said in a note to investors.
Kingfisher, which hasn’t ever reported a profit since its inception in 2005, had debt of Rs7,500 crore as on 30 September, 2011.
It posted a loss of Rs1,027 crore on sales of Rs6,496 crore for the year ended 31 March 2011, compared with a Rs1,647 crore loss on sales of Rs5,271 crore in the year before that.
Kingfisher Airlines had been due to announce third-quarter earnings on Tuesday, but a board meeting wasn’t able to approve the accounts until late in the night because of “hardware” issues.
“Certain sections of the company’s accounting IT system experienced intermittent hardware problems” and consequently delayed the company’s financial results, the airline said on Wednesday. Results were announced around midnight.