KFA may face operational shutdown
25 Aug 2012 7:17 AM IST
Kingfisher Airlines may have to shut down operations if $600 million cash is not infused in the next two months, the Centre for Asia Pacific Aviation (CAPA) said on Friday.
‘Kingfisher is able to continue as a result of daily infusions of funding by the promoter.
However, with mounting losses the situation is unsustainable. In Q1 (first quarter, 2012-13) the promoters invested $133.9 million, but this barely allows the airline to survive,’ CAPA said in a report on the Indian airline industry's performance in the first quarter of the current fiscal.
‘A viable turnaround is unrealistic without a significant re-capitalisation of the airline. Without an investment of approximately $600 million in the next 30-60 days, Kingfisher faces the prospect of an operational shutdown, possibly temporarily, to allow it to restructure and reorganise,’ it said.
According to the advisory company, a restructuring of the airline will require banks to take a significant hit as they have huge exposure to bad debt given to the carrier.
The airline also faces frequent labour unrest with one group or the other of employees going on flash strike demanding payment of salaries and other reimbursements.
The airline had the lowest market share in July which stood at 3.4 per cent.
The report estimated the airline to make a total loss of $220-$260 million in 2012-13. The company had reported a net loss of Rs 650.78 crore ($117 million) for the quarter ended 30 June 2012.
‘Kingfisher is able to continue as a result of daily infusions of funding by the promoter.
However, with mounting losses the situation is unsustainable. In Q1 (first quarter, 2012-13) the promoters invested $133.9 million, but this barely allows the airline to survive,’ CAPA said in a report on the Indian airline industry's performance in the first quarter of the current fiscal.
‘A viable turnaround is unrealistic without a significant re-capitalisation of the airline. Without an investment of approximately $600 million in the next 30-60 days, Kingfisher faces the prospect of an operational shutdown, possibly temporarily, to allow it to restructure and reorganise,’ it said.
According to the advisory company, a restructuring of the airline will require banks to take a significant hit as they have huge exposure to bad debt given to the carrier.
The airline also faces frequent labour unrest with one group or the other of employees going on flash strike demanding payment of salaries and other reimbursements.
The airline had the lowest market share in July which stood at 3.4 per cent.
The report estimated the airline to make a total loss of $220-$260 million in 2012-13. The company had reported a net loss of Rs 650.78 crore ($117 million) for the quarter ended 30 June 2012.
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