Kingfisher waiting for a white knight

On Monday the Kingfisher Airlines stock had hit the lower circuit filter of Rs 15.35. But it is still higher than the Rs 7.01 it had dropped to on August 7. Monday's figure was of course before the evening announcement of a partial lockout in the airline. The numbers are significant for the lenders to the airline to take a call on whether it makes sense to keep the company still flying despite making operational losses of Rs 8 crore a day. The airline is operating only 85 daily flights with 10 operational aircrafts, compared to over 400 daily flights with a fleet of 69 aircraft till November last year.

Vijay Mallya's airline has an accumulated losses of over Rs 6,000 crore (it has never made a profit since its incorporation in 2003) with a debt card of over Rs 7,000 crore, even after a write down of Rs 1,400 crore in 2011. But if the airline cannot begin flying even after Thursday the consortium of 19 bankers will have to declare the entire sum as non-performing asset. This is a call the bankers will have to take after Thursday, once the engineers take a call on returning to their duties. Closing operations will also mean the company's existing flight slots will be up for distribution among the others.

Getting them back will be difficult for Kingfisher and that means the airline's revival through the only possible route, a foreign investment will be more tough to negotiate for Mallya. So, Kingfisher is likely to still try to retain its truncated operations with around 4,000 employees catering to 10 aircraft, making it an airline with the highest employees per aircraft ratio of 400. In a market where engineers and pilots are scarce, all these go to form a part of the package for prospective buyers.

... contd.

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