With following news reports that have appeared in a section of the press today, Kingfisher Airlines Limited has clarified that
GOING CONCERN CONCEPT
It is incorrect to say that Kingfisher Airlines [KFA] Auditors’ have raised serious doubts about the survival of the Airline. In fact, Para [9] of the Auditors’ Report only draws attention of the Members to the reasons [which have been accepted by the Auditors] for preparing the accounts under the going concern concept. The reasons are spelt out in Note 24 to Schedule 19 of the accounts for the year ended 31.3.2011.
During the year, RBI had directed the Banks to independently assess the viability of KFA and this was in fact, carried out by the Lenders with the assistance of SBI Capital Markets confirming that KFA is viable i.e. as a going concern.
In regard to the Auditors’ observations about the Company’s ability to infuse funds, it may be pointed that since the start of the year, long term funds amounting to over Rs.4.75bn has been infused into the Company. Simultaneously, the company is exploring capital raising either through GDR or by way of Rights / Domestic Follow On offering.
The fact that all the Company’s accounts with Bankers are classified as “Standard” i.e. within norms, further gives credence to the issue of going concern.
TREATMENT OF REPAIRS AND MAINTENANCE COST OF Rs. 1.22bn
In regard to treatment of major maintenance, KFA has followed the practice consistent with other major International Airlines.
For example the practice followed by British Airways as extracted from the Annual Report and Accounts 2010 states: QUOTE “Major overhaul expenses including replacement, spares and labour costs, is capitalized and amortized over the average expected life between the major overhauls” UNQUOTE
Similarly, the notes to Financial Statements of Malaysian Airlines state: Quote “Deferred maintenance costs relates to maintenance costs incurred for aircraft, engines, auxiliary power units or landing gears prior to the return obligation stated in the lease agreements. Deferred maintenance costs is capitalized and amortised over the actual flying hours as the aircraft is flown up to its return condition”. Unquote
FUNDING / RIGHTS ISSUE
While the Company is exploring the various options of external fund raising by way of GDR, Rights issue, Domestic Follow On offering etc. an amount of nearly Rs. 5bn has already been infused into the Company by way of soft loans. This has enabled KFA to continue trading and meet its commitments as negotiated from time to time.
