Shares of Kingfisher Airlines plunged to a record low of Rs 14 on the Bombay Stock Exchange on Tuesday.

All aviation stocks fell on reports of the Government deferring its decision on allowing foreign airlines to invest in domestic carriers. But the fall was steepest for Kingfisher Airlines. While Kingfisher shares closed at Rs 16.05, down 5.03 per cent, SpiceJet lost 2.85 per cent to Rs 29 and Jet Airways was down 1 per cent to close at Rs 341.65.

On April 2, Kingfisher had climbed from a previous low of Rs 14.95 on hopes of the FDI proposal getting clearance. However, reports now indicate that the Government could even defer the decision to May-end.

Aviation analysts say that allowing FDI may not benefit the aviation industry greatly. Debt-laden airlines like KFA will find it difficult to take advantage of it, they say.

“Kingfisher Airlines is unlikely to capitalise on FDI in aviation considering it has less than 7 per cent market share. SpiceJet may stand to gain the most and, perhaps, IndiGo over a period of time,” said Mr Nikhil Vora of IDFC. With the domestic aviation sector witnessing high passenger yields, the key to reviving the ailing airline sector lies in revising the cost structure, he added.

Kingfisher Airlines had reported a net loss of Rs 444.26 crore for Q3 2011-12. The banking consortium, with exposure of over Rs 7,000 crore in the cash-strapped airline, has refused to extend further loans till the company brings in fresh equity.

With the account turning sub-standard for all banks, “it becomes all the more difficult for us to consider the airline's request for additional funding”, said a State Bank of India official. “The airline has to come up with a feasible business plan and show seriousness in turning its fortunes,” he added.

Another banker was hopeful that with the airline being allowed to import fuel directly and the FDI coming into place soon, the airline would be able to perform better. Kingfisher's continued operations, despite on a skeletal level, would ensure some revenues for the company, he said. “The airline can't be shut down, and there is some hope in the next two quarters,” he added.

(This article was published on April 24, 2012)
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