Stock Review: Kingfisher Airlines

Capital restructuring and better operational matrices have created positive sentiment for the airline

After being grounded for a while, the share price of Kingfisher Airlines has started gearing for a takeoff. While capital restructuring and equity issuance will lower the huge debt burden of around 6,000 crore, operational parameters are showing signs of improvement.

The management mentioned that the company would raise around $250 million from global depository receipts and `500 crore from the domestic market. The parent will also convert 650 crore worth debt into preference capital. Overall, the debt burden will be reduced by around `2,000 crore, which will bring in more functional clarity for the airline, reckon analysts.

With earnings before interest, depreciation, tax and amortisation (Ebitda) of 177 crore in the June quarter, domestic Ebitda margins more than doubled to around 13 per cent from six per cent in the previous year. The airline was making losses at the operational level in the corresponding quarter of the previous year.

Revenues jumped around 29 per cent year-on-year in the June quarter. The operational matrices that were lagging compared to peers, especially Jet Airways, are catching up now. The critical load factor, which determines profitability and productivity of an airline, has also improved.

For domestic routes, it rose to around 81 per cent in the June quarter, as against 70 per cent a year ago, while it jumped 17 per cent year-onyear to 77 per cent on international routes. Jet Airways has a load factor of around 80 per cent for both domestic and international routes.

On costs, too, there were savings on account of benign fuel prices. Affiliation with the 'Oneworld' global airline group will give Kingfisher access to better packages. This is expected to stabilise international operations, which still report operating losses. However, oil price shock and slump in air travel may stall the take off.