Kingfisher Airlines is bankrupt, says Veritas Invest

After Wednesday’s announcement of shutting down Kingfisher Red, Neeraj Monga, executive vice president and head of research at Veritas Investment said Kingfisher Airlines is a bankrupt organisation. “It has been trying hard to raise money via every means possible,” he added.

Kingfisher Airlines Chairman Vijay Mallya anounced yesterday that they have decided to stop operations of low cost carrier Kingfisher Red. Kingfisher’s move comes at a time when demand for low-fare air travel continues to grow in India. Its rival Jet Airways recently said it plans to introduce low-fare flights to short-haul overseas destinations.

“We have several initiatives. We are doing away with Kingfisher Red because we don’t intend to compete in the low-cost segment,” Mallya told reporters after the company’s AGM. He added that margins and yields are better in Kingfisher Class than Kingfisher Red.

With its losses mounting, Kingfisher Airlines has been struggling to foot its fuel bills, which led to its dozen flights being grounded on a single day in July.

Monga said the airline has been buring cash at a rapid rate. “Nearly 23% of the airline is owned by banks,” he said adding, “UB Holding needs to find rights issue externally.”

The company has got shareholder approval for a Rs 2,000 crore rights issue. Mallya said the previously approved GDR issue could not be launched due to various external environmental factors such as the high crude oil prices. However, Monga feels, it is difficult to believe that KFA rights issue will go through. According to Monga the cash-strapped airlines may need Rs 3000-4000 crore to get itself back on its feet.

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