Kingfisher Airlines networth eroded! IT systems responsible for oneworld delays

Kingfisher Airlines finally came around to accepting that their networth has been eroded when it announced its results on 15th February 2012, in a quietly posted investor relations presentation on its website at midnight. This was a statement made by the auditors of the airlines quite a while back in September 2011, but Kingfisher Airlines always disputed this statement.

The amusing statement tucked away in the notes to the financial statements say:

The Company has incurred substantial losses and its networth 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 aircrafts 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.

What they are saying here, is that the equity invested in the company don’t have any value, or significantly less value, but because Kingfisher Airlines have asked for loans and more equity infusion, the company should be looked at as “in perfect health.” As a shareholder in this company, me thinks my shares held will approach 0 value sooner than later, while Kingfisher thinks they will not go broke or have to liquidate in the times to come.

For Q32011, the airline has reported losses of Rupees 4.44 billion (US Dollars 90 million) , which it intends to blame on the currency movements and oil prices. It said, “Steep depreciation of the Indian rupee coupled with consistently high crude oil prices has led to a challenging quarter for the Indian aviation industry.” Yeah right my boys, you were in the pink of health before this quarter and one bad quarter led to a question of your existence. There is another red herring there, since the tax credit they take shelter in for Rupees 2.13 billion may never come through. Tax credits are given to profit making companies, and they clearly don’t have any profits to show.

In another dramatic scenario enacted in the night of the directors meeting, the IT systems hosting the company’s financials had some sort of hardware failure, and this led to the postponement of the results being discussed by one day. This, incidentally, is the same system that cut them off from the IATA clearing house. Here is what they told the stock exchanges:

Certain sections of the Company”s accounting IT system experienced intermittent hardware problems (which led to our suspension from the IATA Clearing House since restored and consequently delayed the Company’s entry into the oneworld alliance) as a consequence of which the unaudited financial results for the quarter ended December 31, 2011 and the limited review thereof by the statutory auditors could not be completed and presented to the Directors for their consideration. As a result, the meeting of the Directors has been adjourned at the first instance to February 15, 2012 and efforts are on to complete the said unaudited results and the limited review report and place the same before the Directors.

So, that adds the latest blow to Kingfisher Airline’s question of survival. No loans coming forth, no money to pay for salary/fuels/taxes/leases/airport. Flights are being cancelled left, right and centre. Even the Kingfisher brand, Kingfisher Villa in Goa, a couple of helicopters and personal guarantees from the beer baron Vijay Mallya are pledged. Kingfisher is already a non-standard asset on the books of all the big banks in India, ATR has cancelled their order of 38 ATR planes. DGCA thinks they should shut down! What’s next?

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About Ajay Awtaney

Ajay is a financial services pro, working to bring order to the chaos of the financial industry on an everyday basis! Beyond that, he dons the hat of India's favourite frequent traveller, trying to help people elevate their travel experience via tips and tricks they never knew before, or introduce them to the world of miles and points. Armed with an MBA from MDI Gurgaon and graduate degree in computer science from the University of Delhi, Ajay brings a systematic and objective approach on the table for his audience in dissecting travel and loyalty programs in India and around the world, and how to benefit from them. Ajay has been quoted in various reputed traditional and online media including The Hindustan Times, Inside Flyer, Bloomberg, DNA India, Conde Nast Traveller, The Telegraph, Mumbai Mirror, Mint, MoneyLife and The USA Today.

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