31st, Oct 2008
Kingfisher Airlines Limited – commentary on the results for the half year ended 30th september, 2008.
The Aviation Industry is going through a challenging phase globally, driven primarily by spiraling fuel costs, which hit an un-precedent USD 147 per barrel in July 2008. The Indian industry was hit more adversely due to the cumulative impact of Customs Duty and Sales Tax on account of this sharp increase in international fuel prices. The average price of ATF in the six month period from April to September 2008 increased by about 60%. The impact on Kingfisher Airlines alone was to the tune of Rs.640 Crores.
|The industry was constrained to pass on at least a part of this cost push in the form of Fuel Surcharge resulting in an average 55% increase in the end price paid by the travelling public.|
|This increase in fares coupled with the lean season between June and September resulted in a drop in traffic and corresponding low capacity utilization for the industry as a whole. The period saw Kingfisher’s seat factor dropping in line with the industry by about 6%.|
|Apart from the increase in the average ticket value, the Company has initiated a number of steps to mitigate and manage costs. Key Measures Include:|
|Despite the challenging environment, the Company has managed to significantly improve its topline performance. |
|The recent discussion between Kingfisher Airlines and Jet Airways is expected to help both carriers to significantly rationalize and reduce costs by offering a unique high product quality with improved standards of service to its consumers.|
|The two airlines will be able to derive maximum synergies by working together and thereby offer best possible fares for the benefit of the end users i.e., the travelling customer. The scope of this discussion is expected to include the following on the operational and cost aspect. |
|Areas covered on the revenues and revenue related operational aspects are: |
|The softening of the fuel prices has resulted in an improvement in the Company’s performance in September 2008 (fuel prices reduced by 15.5%). The further expected drop in fuel prices will help the Company in the second half of the year.|