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Rationalising of capacity led to drop in passenger revenues for troubled Kingfisher Airlines during 2011-12.
The airline announced its plans to rationalise its operations during the last fiscal in order to contain mounting losses. On the domestic sector, Kingfisher recorded an operating revenue drop of 14 per cent alongside five per cent reduction in capacity.
On its international routes, the company saw five per cent dip in operating revenues amidst six per cent reduction in capacity.
Towards the end of the fiscal, Kingfisher Airlines had to cancel its international operations as IATA suspended it from BSP platform. A press statement from the company said that the airline, while continuing its “previously-stated ‘holding plan' with a limited fleet”, is also progressing on its aircraft reconfiguration plans to contain losses. However, the company has a “focused fleet re-induction plan and hopes to be back to full-scale operations in the next 12 months”.
Lease rentals
Kingfisher Airlines believes that this would be possible with its recapitalisation plans and is confident of achieving it, added the release.
A reduced capacity has also brought down the company's aircraft lease rentals to about Rs 100 crore (Rs 247.43 crore) during the fourth quarter, while it came down to Rs 868.45 crore (Rs 984 crore) for the full year.
The company said in its filing to the BSE cited a clause in its agreement with lessors that the company is to pay lease rentals only in the event of breach of certain contractual obligations in future.
“The company has sought extension of time to meet a part of its obligations which were to be fulfilled by March 31, 2012, which it is hopeful of receiving. No provision is considered necessary as the Company is confident of meeting the relevant obligations,” it added.
Use fees
The use fees (hourly and cyclical utilisation charge) paid in respect of these leased assets have also been treated as maintenance reserves.
“The company is taking steps to formalise this understanding with the relevant lessors. In terms of the company's accounting policy, these use fees are initially included under loans and advances, and are expensed out to the profit and loss account of the time of incurrence of major maintenance expenditure/termination of agreements,” it observed.
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