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Is Kingfisher Is Heading Towards Bankruptcy?

In: Business and Management

Submitted By rvsai
Words 474
Pages 2
The financial agonies for Kingfisher Airlines (KFA) are seeming to become insurmountable. After being forced to massively scale down its operations and ground more than half of its fleet in the month of Feb 2012 when the IT-Dept froze its bank accounts over non-payment of tax dues, the estranged airliner has now cancelled all of its international operations and has the aviation regulator (DGCA) as well as the govt. breathing down its throat questioning the company’s ability to come up with a credible plan and revive the failing fortunes.
The cash-strapped airlines may need Rs 3000-4000 crore to get itself back on its feet. The airline is burning cash at a rapid rate and it is no wonder that they are asking banks for additional working capital. Approximately 23% of the company is now owned by the banks that are already on the hook for approximately Rs 5,000 to Rs 6,000 crore of debt.
They haven’t been paying their creditors for quite some time now. In the absence of additional capital coming into the company, Kingfisher has had no choice but to cut down on the operations, which is not a good sign because if you cut down on operations it will only cause further problems – they need to be in operation to repay their liabilities. All this is further putting pressure indirectly on the creditors to restructure the terms.
So dire are Kingfisher’s circumstances that it recently bounced a $3m cheque to the Airports Authority of India, to which it owes around $40m in fees. Recently state-run oil company Hindustan Petroleum, stopped fuel supplies to Kingfisher after the airline failed to pay a $26m bill.
India’s private airlines began the year optimistically, as soaring passenger numbers raised hopes that profits were finally on the horizon. But despite record numbers of passengers, the airlines are still in the red, as surging fuel prices and fierce price wars with ailing...

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