Kingfisher Airlines posts Rs. 469 cr loss in Q2 FY 2012. Pays 22% of revenue as interest and finance charges

Contrary to its claimed cash-starved position, Kingfisher Airlines has actually performed relatively better than its counter-part listed private airlines counter-parts in India.

In a perverse silver lining to the ongoing fiscal crisis at Kingfisher, the airline slid from a net loss of Rs. 263 Cr. in the first quarter of fiscal year 2011~12 (FY12) to a net loss of Rs. 469 Cr. in Q2 FY2012, an increase of 78%.

In comparison, Jet Airways, increased its losses by 354%, and low fare carrier SpiceJet increased its losses 233%.

Highlights of the Q2 results are:

  • Quarterly net loss for Q2 FY12 of Rs. 469 Cr., up from a loss of Rs. 231 Cr Q2 FY 2011. The airline claims the savings on interest and other costs were offset by a steep hike in fuel prices and the weakening of the Indian rupee, which negatively impacted 70% of the cost base.
  • Operating revenue increased 7% from Q2 FY2011 to Rs. 1,528 Cr,
  • EBITDA loss of Rs. 271 Cr, vs. profit of Rs. 55 Cr, in Q2 FY11
  • EBITDA margin declined from +3.6% to -16.7%
  • EBITDAR loss of Rs. 23 Cr. vs. profit of Rs. 307 Cr, in Q2 FY11
  • EBITDAR margin declined from +20.3% to -1.4%
  • Number of flights increased to 32,926 up 9% from the same quarter last year
  • Capacity measured in ASKs (Available Seat Kilometres) grew 17% to 4,414 million
  • Performance measured in RPKs (Revenue Passenger Kilometres) grew 12% to 3,337 million
  • Passenger load factors fell 3% to 76%

What is worrying is the massive increase in costs, especially fuel costs, without a comparative increase in revenues. Despite an increase in costs of 11%, average revenue per passenger grew only 2%

  • Overall Revenue per ASK (RASK) declined 8% from Q2 FY11 to Rs. 3.69 and passenger RASK declined 7% to Rs. 3.09.
  • Overal Cost per ASK (CASK) (calculated on EBITDA cost) increased 11% to Rs. 4.31 while fuel CASK increased by 45% to Rs. 1.85.
  • The efforts of the airline to reduce costs, especially interest and finance seem to be bearing fruit with Ex-fuel EBITDA CASK decreasing 6% to Rs. 2.46 from Rs. 2.61 in Q2 FY11.

Interest charges have declined 8% from Rs. 363 Cr. to Rs. 333 Cr., but still remain at toxic levels. Kingfisher Airlines is paying out almost 22% of its operating revenue as interest and finance charges alone. Compare the Rs. 333 Cr. of interest charges to the Rs. 279 Cr. paid by the airline as aircraft lease rentals in Q2 FY12.

Domestic operations saw a 5% increase in revenues this quarter compared to a year ago, and delivered an EBITDA margin of -17% in Q2 FY11 when compared to +10% in Q2 FY11. Fuel costs jumped to 40.7% of operating expenses this quarter, up from 29.5% in the same quarter, a year ago. Non-fuel costs too increased to 68.5% of total revenue from 64% a year ago.

International operations continue to remain a drag on the airline. Poor network planning and an ultra-luxurious cabin product which delivers fewer seats per flight conspire to add to the woes of the Kingfisher. Despite an 11% increase in revenues in Q2 FY12 compared to Q2 FY11, the EBITDA margins increased to -20% in Q2 FY12 from -15% in Q2 FY11. RASK increased 8% compared to 12% increase in CASK.

Strategic investor

During press interviews the Chairman and Managing Director, Dr. Vijay Mallya disclosed that Kingfisher Airlines is in discussions with an Indian strategic investor. Speculation is rife whether the investor is one of India’s largest and most trusted business houses the Tatas, or the Sahara group which sold Air Sahara to Jet Airways and recently invested $100 million in to Dr. Mallya’s Force India Formula 1 team.

Airbus A380 deliveries deferred, again.
Kingfisher has a pending order on Airbus S.A.S. for five A380 superjumbos. In the same briefing, Dr. Mallya announced that the airline’s plans on this order have been deferred for at least five years for now. This is the third time the airline has deferred delivery of its order.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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