Kingfisher Airlines is planning to raise around $600 million worth of funds in the current financial year to pay off its debt and strengthen its bottom line, in the backdrop of a turbulent time for the country’s aviation industry.
“The shareholders of Kingfisher (Airlines) have approved a $100 million rights issue, as well as a $100 million GDR (global depository receipts) issue. Both are on track, we have got the shareholders’ approval, so we are now focusing on all the formalities ... Besides, we are also talking to private equity investors for another $400 million and hopefully valuations will get better,” Vijay Mallya, chairman, Kingfisher Airlines, said on the sidelines of the India Economic Summit here.
He also said the funds would be utilised towards “debt reduction, so that we can save on our financial cost to improve our bottom line”.
The airline has reported a 13.4 per cent drop in its net loss at Rs 418.2 crore during the second quarter ended September 30, compared to a net loss of Rs 483.2 crore in the corresponding quarter last year. The company also improved its operational performance with a loss of Rs 178 crore against a loss of Rs 465 crore in the corresponding period last year.
Mallya said the airline has got approval to foray into more international destinations and will be starting the operations soon.
He said the main problems facing the domestic aviation industry are high taxes on jet fuel and the soaring prices of international crude oil. Sales tax on aviation turbine fuel in India ranges from 4 per cent to as high as 30 per cent. And, crude has touched $80 a barrel.
It has appealed to the government to look into the issue. “But if surcharges keep going up, fare revisions are inevitable. The companies and shareholders cannot be expected to absorb the increased cost of fuel and the sales tax on top of it.”
The airline recently raised fuel surcharge by up to Rs 200 to offset the fuel price hike.
Mallya also said the firm had resorted to several cost-cutting measures in the wake of the global economic downturn and converted over 50 per cent of Kingfisher’s capacity to low-cost, making this 70 per cent in all. “We have trimmed our freights, we improved aircraft utilisation. We have also deployed a large amount of old Air Deccan capacity on our routes, now Kingfisher Red. These factors have led to significantly improved second quarterly results.”
