Aviation: Good times around the corner, courtesy Kingfisher :: Kotak Securities PDF link

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Aviation: Good times around the corner, courtesy Kingfisher
` Yields are strong in 4QFY12 versus usual seasonal trends
` Strong trend in yields to continue; Kingfisher unlikely to restore operations
` Industry capacity to grow at low single digit at best; PLFs and yields to
remain strong
` We have a BUY rating on SpiceJet
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily20032012.pdf

Kingfisher Airlines liable for prosecution, government says (ET)

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 Troubled carrier Kingfisher Airlines is liable for prosecution over unpaid taxes, aviation minister Ajit Singh told reporters on Tuesday. The minister said the onus to save Kingfisher Airlines was on chairman Vijaya Mallya. "Vijaya Mallya has to convince DGCA (directorate general of civil aviation) that he is in a position to operate an airline ... The onus is on him," Singh said.

Kingfisher Airlines:: Rating : Exit:: :: ICICI Securities (PDF Link)

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http://content.icicidirect.com/mailimages/ICICIdirect_KingfisherAirlines_EventUpdate.pdf


T o o   m u c h   u n c e r t a i n t y,   r e c o m m e n d   e x i t …
Last week, Kingfisher Airlines (KFA) once again called for massive flight
cancellations amid a liquidity crisis. As a result, its market share has come
down drastically to 11% from 19% last year. Also, according to the
company’s revised flight schedule submitted to DGCA, the company will
now operate 175 daily flights, down from 240 flights that they are
operating currently i.e. a 27% reduction in the capacity, which will further
lead to a fall in its market share, going forward. With this, supply cuts and
offering of seats at discounted rates, its revenues and market share are
going to be impacted severely in future, albeit with lower operational
losses. For the survival of the business, the promoter will either have to
infuse significant funds into the company or bring in strategic partners
with infrastructure for ATF import or some foreign carriers. The company
has guided that they would infuse the sufficient funds into the company
within two months. This can only help the company to tide over the
turbulent times over the medium term. Even if the company is able to
bring down its debt to | 6000 crore as per their guidance, the running of
the business will continue to remain a very tough job due to an
unfavourable operating environment where ATF prices are once again on
a rising trend. With lesser capacity, we believe, it would be a tough job for
the company to service its huge debt with lower earnings, going forward.
Hence, due to unfavourable risk reward ratio given the uncertainty on the
company’s future outlook, we recommend that investors EXIT the stock.

Short-takes: Kingfisher flies low; Ranbaxy's woes continue; MCX::Business Line

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Kingfisher flies low

Freezing of bank accounts by the tax authorities; flight cancellations galore; banks playing hardball on further funding; and rumours of the CEO quitting — Kingfisher Airlines once again made news for all the wrong reasons. Amidst the sombre headlines, the airline managed to provide moments of mirth, when it claimed that ‘bird hits' had also led to the flight cancellations.

Kingfisher Airlines :: ICICI Securities, pdf link

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M a r k e t   s h a r e   f a l l s ,   o pe r a t i n g   l o s s   w i d e n s …
Kingfisher Airlines (KFA) reported consolidated revenues of | 1,342 crore
(down 19.1% YoY) that were marginally lower than our estimated
revenues of | 1,406 crore due to a sharp decline in passenger traffic. It
declined by 16% YoY on account of a 13% YoY reduction in number of
flights. Flight cancellations by the company also affected passenger
sentiment negatively. International operations, that accounted for 27% of
total revenues, have also been impacted negatively. Revenues in this
segment declined by 9.0% YoY due to a 13% decline in passenger traffic
despite a 6% YoY increase in the number of flights. On the cost front, the
operating cost rose 7% YoY led by  36%  and  12%  rise  in  fuel  cost  and
lease rentals, respectively. As a  result, the company reported an
operating loss of | 350.5 crore vs. our estimated operating loss of | 240
crore. In addition, interest cost continued to remain higher and also rose
by  2.2%  on  account  of  a  rise  in  the debt burden. However, a sharp spurt
in other income to | 200 crore vs. | 17.3 crore (Q3FY11) and | 102 crore
(Q2FY12) helped to taper its loss for the quarter.
ƒ Losses in market share due to sharp supply cuts
KFA’s domestic market share declined sharply by 470 bps YoY to
14.2% as the company cut down capacity of flights by 15% YoY
during the quarter. This move also impacted passenger sentiments
negatively. As a result, its market share at the end of December
2011 dipped further to 12.1%.
V a l u a t i o n s
At the CMP of | 27, the stock is trading at 1.5x and 1.3x its FY12E and
FY13E EV/sales, respectively. We continue to place KFA’s rating and
target price under review as rising concerns on the company’s liquidity
crunch due to heavy operational losses in the past few quarters have
undermined investor confidence in the past few months. Although the
recent positive policy reforms like allowing ATF import directly by Indian
carriers and 49% FDI by foreign carriers has improved the scope for long
term growth of the sector, fund infusion by the KFA promoter remains a
crucial issue for effective running of the business. Hence, unless we see
any positive development on this front, we continue to keep our rating
UNDER REVIEW on the stock.

SBI asks Kingfisher Airlines to reverse about Rs 100 crore paid to Vijay Mallya and UB Holdings:: ET

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 Kingfisher Airlines, the carrier waiting to be bailed out by banks, has been directed by the State Bank of India to reverse nearly Rs 100-crore guarantee commission it paid to promoter Vijay Mallya and UB Holdings as it is a regulatory violation, said three people familiar with the direction. Lenders are seeking the reversal of transactions by the ailing airline as a pre-condition to consider the second round of bailout in as many years after it posted yet another quarter of losses. "Mallya has agreed that they would not exercise the option," said a banker requesting anonymity. But it is not clear yet whether the past transactions are being reversed. The carrier, which is facing liquidity crunch, entered into an agreement with Mallya and his holding company, UB Holdings, where the airline had paid Rs 49.48 crore and Rs 58 crore, respectively, against the guarantees they had provided for the Rs 7,000-crore loans from banks. The airline, promoted by liquor baron Mallya, has been teetering on the brink of collapse for a few months amid cancelled flights and non-payment of salaries. Lenders are laying down strict conditions for the next round of funding as the airline failed to improve its performance even after loan restructuring. Apart from pushing the banks to a disadvantage, it is also a regulatory violation when promoters get paid for what is essentially their business. "The system of obtaining guarantees should not be used by the directors and other managerial personnel as a source of income from the company,'' RBI has said. "Banks should obtain an undertaking from the borrowing company as well as the guarantors that no consideration whether by way of commission, brokerage fees or any other form, would be paid by the former or received by the latter, directly or indirectly." Amid this controversy, SBI Capital Markets, the mandated firm to restructure its loans, on Friday made a fresh case for Kingfisher Airlines on grounds that initiatives taken by the government makes it a viable proposition. SBI Caps has asked banks to provide Rs 800-1,000 crore of fresh loans for the airline's revival. Kingfisher and lenders discussed various alternatives of funding the airline. Bankers said they needed time to give their response.

Kingfisher Loss: Beauties move to Air India!!! How things Change!!!

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36 Kingfisher air hostesses join Air India

He may be old and completely broke, but still has a heart of gold. Air India's Maharaja is now playing Santa to Kingfisher's unpaid crew. On Christmas eve, 36 airhostesses from Mallya's beleaguered airline joined AI. While timely payment of salaries has become a dream at both AI and Kingfisher, the crisis in Mallya's airline has suddenly made employees long for the safety of a sarkari job - even if it too happens to be a mostly unpaid one. Before airhostesses, Kingfisher had witnessed an exodus of pilots with nearly 140 leaving in past two to three months. "We are facing a severe crew shortage because of which our flights keep getting delayed. There are times when pilots are in cockpit but the plane can't operate due to crew shortage. We are looking out for airhostesses and have got many applications from those serving some other airlines. Some months back, we recruited people from other big airlines for our operation control room at Delhi's IGI Airport," said an AI official, adding the airline is not yet recruiting pilots though it's getting many applications from pilots working in other airlines. To cut costs, Kingfisher started shutting crew bases in some cities. The airline did not comment on this story. Employees at both companies have become extremely uncertain over salary payment.

Kingfisher Airlines: Waiting for fund infusion: ICICI Securities

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F u n d   i n f u s i o n   a   k e y   t ri g g e r ,   g o i n g   f o r w a r d …
Kingfisher Airlines (KFA) reported consolidated revenues of | 1,528 crore
(up 10.5% YoY, down 18.8% QoQ) that were lower than our estimated
revenues of | 1,680 crore due to a higher-than-expected drop in yields
domestically. It declined 16% YoY. International operations, that
accounted for 25% of total revenues, performed marginally better
compared to the domestic segment. Revenues in this segment grew
11.0% YoY mainly due to 8% YoY increase in yield. On the cost front, fuel
costs continued to remain higher and rose sharply by 70% YoY. With
lower revenues and high operating costs, the company reported a net
loss of | 469 crore for the quarter.

ƒ Lower yields and higher fuel costs dent margins
During the quarter, yields for the domestic segment remained under
pressure partly due to the competitive pricing strategy adopted by
major competitors and partly due to an increase in the supply
(ASKM). As a result, KFA’s domestic yield declined 16% YoY to | 4.2
per ASKM. Fuel prices for the quarter rose over 35% YoY and with
9% increase in the departures and  rupee depreciation, fuel cost for
the quarter went up by over 70% YoY. Interest cost rose
sequentially by 9% to | 334 crore due to an increase in debt. As a
result, its loss for the quarter further widened to | 469 crore.
V a l u a t i o n s
We have revised our revenue forecast downwards by 7% for FY12E
taking into account the current quarter’s dismal performance. At the CMP
of | 25, the stock is trading at 1.2x and 1.0x its FY12E and FY13E EV/sales,
respectively. We are placing KFA’s rating and target price under review –
the stock price has come off 40% in the past three months as rising
concern on the company’s liquidity crunch for running the business has
undermined investor confidence. However, we believe, any positive
policy reforms like rationalisation of domestic taxes and allowing foreign
direct investment (FDI) are key positive triggers for KFA and the industry,
going forward. Hence, unless we see any development on fund raising or
policy reforms, we will continue to keep our rating UNDER REVIEW.

52 week FLOP: KINGFISHER AIRLINES :: Business Line

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Buffeted by heavy debt burden and steep increase in fuel cost, Kingfisher Airlines seems to have landed in financial quicksand. The flight cancellation imbroglio last week is the latest in the series of bad news faced by the company, and reflects the make-or-break situation it finds itself in.

Over the last few months, the airlines' auditors have questioned its ability to survive without additional funds, analysts have labelled it bankrupt, and the company's move to exit the low-fare segment has found few takers. Kingfisher Airlines has been struggling for a long time now and has continuously been in losses since inception in 2005. This is primarily due to the huge debt on its books, which prevented it from posting profits even during the better days of 2010 when crude oil prices were benign.

The company's debt recast early this calendar, which saw lenders pick 23 per cent stake, had raised hopes about Kingfisher's prospects. However, the sharp rise in the price of crude oil to above $100 a barrel queered the pitch. Also, capacity increases and irrational pricing in the sector prevented fare rise to sustainable levels, and have amplified the company's losses. Kingfisher may be in urgent need of a lifeline now, but it remains to be seen whether lenders, who have seen the value of their stake erode sharply, oblige.

Kingfisher Airlines - Incorporating Debt Conversion to Equity, : JP Morgan

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Kingfisher Airlines Limited
Underweight
KING.BO, KAIR IN
Incorporating Debt Conversion to Equity, Maintain UW



• Conversion of debt at higher than expected price: Kingfisher’s debt
from financial institutions was recently converted to common equity at
Rs64.48/share. The conversion price is higher than our assumption of
Rs40/share, which has resulted in lower equity dilution v/s our
estimates. Post conversion, Kingfisher debt has reduced by Rs14.95B
(Gross debt at Rs79.2B at end of FY10) with lending banks now owning
23.4% stake in KAIR. We raise our TP to Rs43 (from Rs39) to account
for higher conversion price. Maintain UW.

Add Kingfisher Airlines; Target :Rs 49 :: ICICI Securities

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Kingfisher Airlines:: Rising yields drive growth...
In Q3FY11, Kingfisher Airlines (KFA) reported consolidated revenues of
|1,658.7 crore (up 28.1% YoY, 20.0% QoQ), which remained more or
less in line with our expectations (I-direct estimate: |1,690.1 crore). The
growth in revenue was mainly driven by strong growth in yield per
ASKM (domestic yields up 16.2% YoY, international yields up 40.7%
YoY) on robust demand despite a decline in the domestic market share
led by a reduction in the total number of flights. It declined 5.8% YoY to
30,883 (domestic, international) due to unplanned grounding of Airbus
aircraft. At the PAT level, KFA reported a net loss of |253.9 crore (Idirect
estimate: |168.5 crore). It remained lower due to higher interest
and depreciation costs.

Emkay; 27 December, 2010-news

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News clippings

**** The winning bid for a majority stake in Patni Computer was likely to be under Rs

550 a share which is 12.5 per cent above its Friday closing price. The founding

Patni brothers are looking to sell their 46 per cent stake, while private equity firm

General Atlantic plans to sell its roughly 17 per cent holding.

**** International Coal Ventures Ltd has appointed Citigroup Inc. to examine a

possible takeover offer for the Sydney-based coal company Riversdale Mining

Ltd. to counter a A$3.9 bn bid from Rio Tinto Group with mines in Mozambique.

The members of the International Coal Ventures consortium are NTPC, Steel

Authority of India, NMDC Coal India and Rashtriya Ispat Nigam Ltd. A successful

bid for control will need the support of at least one of Riversdale’s major

shareholder, with the top-three investors owning about 51 percent.

**** Welspun Group's Welspun Infra Projects today said it has acquired 35 per cent

stake in Leighton Contractors (India) for Rs 470-crore to pursue infrastructure

opportunities in India and the transaction is subject to customary statutory,

regulatory and other corporate approvals and is scheduled to be completed in the

next 90 days. Leighton Contractors (India) is the Indian arm of Leighton

International Limited, one of the world's major project development and

contracting organisations.

**** Kingfisher Airlines is all set to launch its GDR Issue of about USD 300 million in

January or February 2011. Importantly, this will be post the conversion of debt

into equity.

**** Electrical components maker Havells India expects to double its capacity for

compact fluorescent lamps (CFLs) within the next two years. Havells will invest

1.2 billion rupees in 2011-12 to produce 10 million CFLs in the next two years, as

the company looks to leverage its Sylvania brand.

**** Gujarat State Petroleum Corporation (GSPC) has discovered a huge reservoir

of gas in an onland exploration block in Ankleshwar and the discovery of a huge

reservoir of gas at the Ankleshwar 41-S well could potentially open a new zone

for exploration for us there.

**** Aditya Birla Retail that operates supermarkets and hypermarket formats under

'more' brand is looking at scaling up its supermarket and hypermarket chain to

1,300 and 65 respectively by 2016. Currently it runs 540 supermarts and nine

hypermarkets across the country.

Domestic aviation sector update

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Domestic aviation sector update – November 2010
Domestic passenger traffic witnessed growth for the 11th consecutive month, up by 4.3%
mom to 48.8lakh (46.8lakh) passengers in November 2010. For the 11 months (January–
November 2010), passenger traffic grew by robust 18.9% yoy to 468.1akh (393.5lakh)
passengers.
In December 2010, SpiceJet witnessed a 12.2% yoy and 3.2% mom increase in domestic
passenger traffic to 6.5lakh, currently the fifth largest carrier in the domestic market
behind Kingfisher (9.3lakh), Jet Airways (9.3lakh), Air India (8.4lakh) and IndiGo
(8.4lakh).
The industry’s overall load factor witnessed mom growth in November, primarily due to
strong tourist demand during the festive season. During the month, load factors for
Kingfisher, IndiGo, SpiceJet, Jet Airways and Air India stood at 86.7%, 91.0%, 87.5%,
77.0% and 76.9%, respectively.
At the end of the month, market shares of major industry players stood at 17.1% for Air
India (Domestic), 19.2% for Jet Airways, 7.0% for JetLite, 19.1% for Kingfisher, 13.3% for
SpiceJet, 6.9% for GoAir and 17.3% for IndiGo. We continue to maintain our Neutral
rating on SpiceJet.

Kingfisher Airlines -On a recovery path::JPMorgan

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Kingfisher Airlines Limited
Initiation
Overweight
KING.BO, KAIR IN
On a recovery path



• Initiate with Overweight, PT of Rs83: Our PT implies 24% upside
from the current share price. KAIR is the second-largest full service
airline in India with passenger market share of 19%. We expect a sharp
turnaround in earnings driven by an improved operating environment,
restructuring of operations, and conversion of debt into equity.

India: Airlines Out of turbulence:: JPMorgan

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• Three initiations: We initiate coverage on three aviation stocks: 1) Jet
Airways, with an OW rating and PT of Rs1,090 based on 8x FY12E
EV/EBITDAR, 2) Kingfisher Airlines, with an OW rating and PT of
Rs83 based on 8x FY12E EV/EBITDAR, and 3) Spicejet, with an OW
rating and PT of Rs115 based on 9x FY12E EV/EBITDAR.

Kingfisher Airlines -Q2FY11: Meets expectation...ICICI Sec

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Q2FY11: Meets expectation...
In Q2FY11, Kingfisher Airlines (KFA) reported consolidated revenues of |
1,382.7 crore (up 24.3% YoY, down 15.7% QoQ), which remained more
or less inline with our expectations (I-direct estimate: | 1,333.6 crore).
The growth in revenues was mainly driven by strong growth in yield per
ASKM (domestic yields up by 27% YoY, international yields up 51%
YoY) on robust demand despite a decline in market share led by
reduction in the total number of flights. It declined 10.5% YoY to 30,277
(domestic, international) due to unplanned grounding of Airbus aircraft.
At PAT level, KFA reported net loss of | 230.8 crore (I-direct estimate: |
292.4 crore). It remained marginally better on lower depreciation.

ICICI Securities: Indian aviation sector: Raise target for Jet Airways, SpiceJet and Kingfisher

Flying high...
The Indian airline sector continued to put up an impressive performance
(domestic pax traffic growth of 20% YoY during April-August 2010). This
was driven by strong macroeconomic growth (average GDP growth of
~8% YoY in Q2FY10-Q1FY11), conversion of FSC’s major capacities
towards low cost (in line with the changing preference of customers)
and stable crude oil prices (average of US$75 per barrel in Q2FY10-
Q1FY11 vs. US$121 per barrel Q1-Q2FY09). We reiterate our positive
outlook for the sector given strong operational performance of the
players and forthcoming government support for debt restructuring.
􀂃 Growth momentum continues
With the shift of the domestic airlines sector towards low cost services
and strong capacity rationalisation, major players have reported high load
factors (in the range of 75-80% for FSCs and 84-89% for LFCs) in Q1FY11.
We believe domestic demand will remain buoyant driven by strong
macroeconomic growth (GDP expected to grow at higher than 8% YoY,
as per RBI), affordable airfares and stable crude oil prices. In our view,
higher load factor will drive earnings growth in the sector as capacity
addition has been deferred by players for the next one or two years.
􀂃 Debt restructuring coming at right time
The government has agreed to a debt restructuring plan for major FSCs,
which are reeling under massive debt burden of ~` 60,000 crore (FY10).
According to the plan, which has received final approval from the RBI,
domestic banks are expected to restructure the loans of the airlines that
will enable them to raise fresh funds in order to deleverage their balance
sheet and finance future expansion plans.
Recommendations
Due to strong improvement in the domestic pax traffic (growth of 14.3%
YoY in FY10 vs. de growth of 11.1% in FY09), capacity rationalisation and
low fuel expenses, airlines have posted a robust operational performance
in FY10. Further, the sector is increasingly getting support from the
government in terms of debt restructuring programme and permission of
fund raising through various options. In our view, this will enhance the
attractiveness of the sector, going forward. In light of the positive
development in the sector and improving operational performance of the
players, we are raising our target price for Jet Airways to ` 850/share
(from ` 690/share), SpiceJet to ` 80/share (from ` 72/share) and Kingfisher
Airlines to ` 71/share (from ` 52/share).