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A Hard Time For Kingfisher Airlines

Kingfisher Airlines is in trouble for cancelling flights, it seems. They have cancelled 50% of their flights on Monday (according to WSJ) and 50 pilots have resigned in a week. They have cancelled 30 more flights today and stopped all flights to Dhaka. The airline regulator DGCA has called the top brass to explain why so many flights were cancelled and requested other airlines to accomodate them.

Kingfisher has explained that its bank accounts were frozen by tax authorities – the accusation was that they haven’t deposited the TDS they have collected. (When a company pays salaries, it deducts a certain portion as income tax at source; this is supposed to be deposited to the tax department by the 7th of the following month.) Employees haven’t been paid, and pilots have said goodbye.

By and large the industry is suffering, but in Jan 2012 – the DGCA has removed the data from 2011 – Kingfisher is not the biggest culprit for cancellations.


Secondly, Kingfisher has done pretty well – again according to the DGCA  – it has the best on-time performance of the lot.


And also, the (nearly) lowest passenger complaint ratio!


Now I don’t know how reliable this data is, as Kingfisher has had serious news items about cancellations, but the data shows it’s not doing as badly as one would think?

The share has fallen 9% today but is at least 20% higher than the lows of Jan.


While the stock craters, news comes in that certain FIs have converted part of their debt to equity at Rs. 25 per share, even if that may be forced. Banks are calling the exposure to KFA an NPA, lenders are trying to sequester assets, airports are refusing them entry unless they pay, oil companies want them to put down cash for the oil they get, and companies that leased them planes are taking the planes back quoting non payment of rent. This is not a good sign, and no matter what the reports, this seems to be the perfect storm for Kingfisher.

Disclosure: no positions. I won’t be buying, even if the data looks good. (Honestly, the DGCA data is something I suspect now).

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