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KFA Down And Nearly Out?

It looks like we have a victim of leverage, in Kingfisher Airlines (KFA)

Kingfisher, which is partly owned by brewery tycoon Vijay Mallya, has canceled more than 120 flights this week as pilots and crew called in sick after their October salaries were delayed.

The airline says flights were canceled because it was reconfiguring planes, the Press Trust of India reported. The Economic Times reported that leasing companies want Kingfisher to return their planes after the company fell behind on payments.

Kingfisher shares slid more than 12 percent on the Mumbai stock market Friday.

India’s airline industry has been hit by rising fuel costs and a crushing price war. Kingfisher is currently struggling under debt of $1.4 billion and shut down its budget carrier in September after it ran up losses.

Kingfisher’s problems have worsened after three oil companies stopped giving it jet fuel on credit and asked the airline to make daily payments.

The airline has grounded eight of its leased turboprop ATR aircraft, and returned 14 leased A320 jets, leaving it with fewer aircraft in its fleet.

The stock’s at 19 and looking very bad, as it went below earlier lows of 18.85 earlier before it rebounded up. I’d be very careful buying this stock. But of course, it’s the age of bailouts….

  • sanesh says:

    Dr Vijay Mallya was/is a member of parliament so bailout will be arranged by him
    Can you believe that sometime back in name of restructuring KFA’s debt worth Rs 1400 crore was converted by banks into equity and subscribed by banks at Rs 62, led by our great SBI. All this for a company which did not have money to pay parking charges of the aircrafts at the airport. Even a 2-wheeler owner manages his finances better than this Dr. (Dr.. which stupid university would have given him a doctorate).
    No wonder both the borrower and lender are now in a mess.

  • Kshitij says:

    This could be a restructuring play, possibly solid equity dilution and depending on the plan (PE acquisition?) stock will shoot up for 1 to 2 days based on some news one day. Hopefully Deepika will approve then.

  • bikash subba says:

    I would never ever buy into airlines…Warren Buffet once said something like,’ if there was an investor watching the Wright Brothers doing their thing, he would have done the investment community a great favour by shooting them down’….something along those lines

  • Srinivas says:

    Would second Kshitij’s view.
    I feel that there will be a drama of bail out next week. Share price may go up. However, long term future appears bleak.

  • Suhail says:

    Has any Tilson or Einhorn of Indian stk markets done a reasoned valuation with a view to shorting on this? (or even maybe a turn-around play – but it might be too early in this case)

  • Nachy says:

    The airlines will be bailed out. Both SBI & ICICI has 5 % stake in the airlines.The Govt. cannot stand to lose this.

  • Px says:

    Someone in the business told me that the people connected to lota and crocodile will be investing in KFA