Kingfisher Airlines Ltd. (KAIR), struggling with losses and a cash shortage, jumped the most in more than three years after the Indian carrier said it is in talks with several investors to raise funds.
Kingfisher, controlled by billionaire Vijay Mallya, soared 20 percent, the most since May 2009, to 8.85 rupees at close of trading in Mumbai. Mallya’s United Breweries Ltd. (UBBL) surged after the beermaker’s quarterly profit rose 39 percent. United Spirits Ltd. (UNSP) and United Breweries Holdings Ltd. (UB) also gained.
The carrier is betting on a proposed change in India’s aviation rules to win investments as it pared two-third of flights, grounded planes and struggled to pay salaries following more than 19 quarters of losses. Kingfisher posted a wider first-quarter loss on Aug. 11 as passengers shunned the carrier because of service disruptions.
“There is speculation that some investments are coming for Kingfisher,” said Sudip Bandyopadhyay, chief executive officer of Destimoney Securities Pvt. “So the market has ignored the financial results.”
India is planning to allow overseas carriers to buy as much as 49 percent in local operators as airlines seek funds after high fuel costs and a price war caused industrywide losses. Kingfisher, based in Bangalore, has said potential investments hinge on the rule change.
The carrier “continues to believe it will get recapitalized and get on a path of sustained profitability,” the company said in a statement dated Aug. 10, without giving details. Parent UB Group gave more than 7.5 billion rupees ($135 million) to help the airline meet cash requirements, it said.
The UB Group’s “intention is to keep the airline going until they can find an investor,” said Binit Somaia, a Sydney- based director at CAPA Centre for Aviation, an industry consultant. “The most obvious candidate as a strategic investor is a foreign airline.”
The carrier has asked banks for more loans as its market share plummeted to sixth from second. Mallya has been seeking investments since at least November.
Prakash Mirpuri, a spokesman for Kingfisher, declined to comment on the share-price jump and on fundraising talks.
Kingfisher posted a net loss of 6.5 billion rupees in the three months ended June 30, compared with 2.6 billion rupees a year earlier, it said in the statement. That was narrower than the 11.5 billion-rupee loss in the quarter ended in March.
Jet Airways (India) Ltd. (JETIN), the nation’s biggest airline, and discount carrier SpiceJet Ltd. (SJET) both returned to a profit in the first quarter. Jet rose as much as 5.7 percent to 389.10 rupees while SpiceJet gained 2.9 percent.
Kingfisher is operating 20 planes as it cut services to about 120 flights a day, compared with 66 aircraft and about 340 daily flights in March 2011. Its market share dropped to 4.2 percent as of June, compared with 27.4 percent for Jet and 26 percent at discount carrier IndiGo.
The company spent 3.8 billion rupees on returning or idling aircraft after cutting flights, Kingfisher said. It’s negotiating with lessors for more time to pay rentals on some aircraft, the airline said.
Following a directive from its lenders, Kingfisher withheld 280 million rupees in fees to entities that arranged loan guarantees, according to the statement.
The carrier has ended international operations and delayed Airbus SAS A380 deliveries beyond 2016 because of the losses. It was also shut out from International Air Transport Association’s billing systems after failing to pay required cash deposits.
Kingfisher is in talks with IATA for regaining access, Tony Tyler, director general of the group, said July 25.
The airline pledged its brand, office furniture and other assets against 64.2 billion rupees of debt. It has delayed salaries to employees and also failed to pay banks, airports, tax authorities and fuel suppliers.
Last month, the carrier canceled about 40 flights after some employees refused to work because they weren’t paid. The services were restored later. Kingfisher is also in talks with banks and lessors after they invoked 8.4 billion rupees of financial guarantees its parent provided.
Kingfisher may post a loss as high as 14 billion rupees this fiscal year and the carrier needs about $1 billion of funds, CAPA said in May.
Kingfisher has a long-term debt to total capital ratio of 193 percent, according to data compiled by Bloomberg. Jet Airways’ ratio is 58 percent, while SpiceJet’s is at 93 percent.
Industrywide losses by India’s airlines totaled more than $2 billion in the year ended in March, according to CAPA. That may narrow to as much as $1.4 billion in the current fiscal year, CAPA said.
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