No more the King of Good Times
You wonder really what happened to the airlines started by the liquor baron of India. The airlines touted as one of the world’s best luxury airline and giving the likes of Virgin Atlantic a run for it’s money, suddenly seems to be reeling from a financial crisis! But is it true that the ailing airline is a victim of the various factors that has affected the airline industry worldwide. Many would like to think so but if you look at the company’s financials, you will find that the story is not quite true. The company hasn’t registered a profit since it’s inception!
Towards the beginning of this month, the KF Airlines stock price hit rock bottom falling down to INR 10.05. The promoter group has reduced it’s holdings in the company in the recent months and currently the bifurcation stands as follows:
You now wonder how the companies have been doing under the UB Group banner over the last few years! Surprisingly, not so bad!
A company that commanded a stock price of INR 335.00, once upon a time is now tottering along and trying to stay afloat. However, the net profit of the other companies under the UB umbrella doesn’t seem to be doing that bad! If you see the chart below, you will see that the company has never registered a profit!
So how does a company proclaim itself to be the king of the skies when it is a pauper in it’s financial base! The service provided by Kingfisher Airlines till about a year or two back was top notch and I used to be a Kingfisher Airlines loyalist! Now that the airlines is running a reduced set of flights on a daily basis, it is quite difficult to fly only Kingfisher. With it’s passenger base dwindling and finances hard to come by, what is the plan that the head honcho of the airlines has to turn around airlines into a profitable enterprise for the first time.
The financial crisis has led the airlines to have multiple run-ins with the aviation authorities in India, the loan giving institutions and the income tax department of the country! The airlines still hasn’t made a turnaround of it’s fortune and doesn’t look like to be on the way to revival yet! Due to it’s woes, it has left in it’s wake…. disgruntled passengers, suspicious lenders, and a wary aviation governing body!
A lot of the blame has been placed squarely on the rising prices of crude oil and various other taxes levied on airfares. It is not incorrect to say that the taxes levied are on the higher side. If you look at your airline ticket price, you will find that a significant percentage of the total amount is just one or the other form of taxes under various headings! The crude oil pricing has been a cause of concern for the aviation industry for a number of months now! All the airlines in the Indian commercial airlines business (barring Indigo who is in the green) is facing the pinch!
But basing these factors as a problem is blatantly misleading as the airlines is yet to post a profit or for that matter break even! If you look at the history of it’s share price, you might want to believe that the high performing stock ran into bad weather! However, you might also want to consider that this non-performing asset might have been a bad investment which didn’t come under the scanner till things really got out of hand!
What is interesting is that the top share holder in the company is the State Bank of India and ICICI Bank! With the largest pie in the public shareholder being the State Bank of India, you wonder what would happen if the airlines actually went bankrupt! Banks would have to write off the loans given as a bad-debt and the Indian government would have to pump money back into the bank considering that this is the people’s money that we are talking about. Going bankrupt for the company is not an option as a lot is at stake but what is happening to redefine it’s current state, no one seems to know! And the airlines seems to be redefining rock-bottom every quarter!! So what do the executives of the now smallest market share holding airlines in the Indian airspace have to say to all this?