Mar 31, 2013
1. Corporate Information
(a) Background
Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited)
("the Company") is engaged in rendering scheduled and unscheduled
aircraft passenger and cargo services, including charter services. The
Company was incorporated on June 15, 1995 as a private limited company
and converted itself into a public limited company on January 31, 2005.
Consequently, the Company changed its name from Deccan Aviation Private
Limited to Deccan Aviation Limited. On June 12, 2006, the Company''s
shares were listed on the Bombay Stock Exchange Limited and the
National Stock Exchange Limited, pursuant to the Company''s initial
public offer of shares. The scheduled airline business of Kingfisher
Training and Aviation Services Limited ("KTASL") (previously known as
Kingfisher Airlines Limited) demerged on a going concern basis with the
Company, with effect from April 1, 2008 as the demerger appointed date,
vide scheme of arrangement approved by the honourable High Court of
Karnataka vide its order dated June 16, 2008 under sections 391 to 394
of the Companies Act, 1956 (ÂScheme"). The helicopter charter division
of the Company was also hived off pursuant to the Scheme. The Company
changed its name from Deccan Aviation Limited to Kingfisher Airlines
Limited, with effect from September 5, 2008.
(b) Demerger of the commercial airline division of KTASL
(i) Order of the Karnataka high court in form 42 of the Companies
(Court) Rules, 1949 in respect of the Scheme is yet to be passed.
(ii) Documentation in respect of transfer of certain assets and
liabilities taken over pursuant to Scheme, to the name of the Company
are pending. The Company is in the process of transfer of charges
created by KTASL to its name in respect of securities granted for loans
so taken over by the Company, in consultation with the Registrar of
companies.
2 Buildings constructed at a cost of Rs.865.86 Lacs are on land
belonging to the Airport Authority of India. Such rental agreements are
renewable on a periodical basis.
3 Employee Stock Option Plan [ESOP]
The Board of Directors of the Company are yet to formulate the stock
option plan to the employees of the commercial airline division of
KTASL taken over by the Company, pursuant to clause 11.1 of the Scheme.
4 Leases and Hire Purchase
The Company has entered into operating and finance lease agreements.
Disclosures required under AS 19 on "Leases" is as given below:
(a) Operating leases
Operating lease arrangements comprise of leases of aircraft,
helicopters, spare engines and office premises. The salient features of
such lease agreements are as follows:
1) Lease periods range up to twelve years and are in certain cases
non-cancellable.
2) Lease rentals are usually fixed over the term of the lease while
some arrangements are subject to adjustments linked to the Libor rates
movements.
3) The Company also has agreements for maintenance and lease of stores
and spares for such aircrafts for which fixed and variable rentals are
paid. Variable rentals are paid on a pre determined rate payable on the
basis of actual flying hours / cycles. Such variable rentals are
subject to annual escalations as stipulated in the agreements. However,
the Company is eligible to claim reimbursement of maintenance costs to
the extent eligible under the agreements.
4) The Company does not have an option to buy the aircraft or
helicopters and spare engines or to renew the leases.
5) In case of default by the Company, in addition to repossession of
the aircraft, penalties are stipulated in the agreements.
6) The Company is required to deposit a commitment fee and a security
deposit with the lessor or provide a letter of credit for such amounts.
7) Office premises are subject to further renewal after the expiry of
original non cancellable period as per the original agreement.
In addition to the above, the Company has entered into agreements to
lease aircrafts / engines in respect of which the aircrafts / engines
are pending delivery / the lease was yet to commence as at March 31,
2013. The above table of minimum lease payments does not include
amounts that may become payable in respect of leases yet to commence as
at March 31, 2013.
5 Segment disclosures
(a) Geographical segments
Considering the internal reporting framework, the Company has
considered geographical segments as the primary segments. Such segments
consist of domestic air transportation within India and international
air transportation outside India.
The Company only had domestic operations during the year 2012 - 13 and
hence segmental results have not been separately disclosed. The value
of assets and liabilities, capital expenditure incurred during the year
and depreciation on fixed assets segment wise cannot be segregated and
identified to any reportable segment. The segmental results for the
year 2011 - 12 is given below.
(b) Business segments
The Company operates in a single business segment, i.e. of providing
scheduled and unscheduled air transportation services. Accordingly, no
separate segment disclosures for business segments are required to be
given.
6 Deferred tax credit earlier recognized up to March 31, 2012
aggregating to Rs. 404,586.77 lacs has been derecognized during the
year by debit to surplus account (reserves and surplus) in the balance
sheet.
7 Provisions
In accordance with Accounting Standard - 29 ÂProvisions, Contingent
Liabilities and Contingent Assets'', following is the movement in
provision towards cost for frequent flyer program.
(a) Frequent Flyer Program:
The Company has a Frequent Flyer Program (King Club), wherein
passengers who fly frequently are entitled to accumulate miles to their
credit. Passengers are eligible to redeem such miles in the form of
tickets, either on the Company or its partners'' airlines. The cost of
allowing free travel to members is accounted considering the members''
accumulated mileage on an incremental basis. However, in the light of
inadequate historical data, the Company has not factored costs that
would be incurred by it while estimating provisions required, in case
eligible passengers redeem such miles for services/tickets of partners.
The movement in the provision towards cost for frequent flyer program
during the year is as under:
(b) Leave encashment / compensated absences
The movement in the provision towards cost of leave encashment /
compensated absences during the year is as under:
8 The Company is not aware of the registration status of its suppliers
registration under the MSME Act, 2006 ("Micro Small and Medium
Enterprises Development Act 2006"). Accordingly, information relating
to outstanding balances due have not been disclosed as it is not
determinable. Similarly, interest payable if any, has not been computed
and provided for.
9 Accounts of certain creditors, debtors, IATA, loans & advances, bank
accounts, passenger service fees and charges payable to airport
operators, service tax payable (including under reverse mechanism),
input service tax credit recognized are subject to review /
reconciliation / confirmation. Adjustments, if any will be made on
completion of such review / reconciliation / receipt of confirmations/
identification of doubtful and bad debts/ advances.
10 The Company has accumulated losses of Rs.1,602,346.91 lacs as at
March 31, 2013 and its net worth as at that date is minus
Rs.1,291,981.85 lacs. The scheduled operator''s flying permit (Permit)
issued by the Director General of Civil Aviation (DGCA) has lapsed and
is yet to be renewed. The consortium banks who had lent monies to the
Company have recalled their debts in April 2013. Although these events
or conditions may cast significant doubt on the Company''s ability to
continue as a going concern, it has detailed plans for renewal of its
operations. It has filed the necessary application to the DGCA to renew
the Permit and is exploring various options to recapitalize and resume
operations. The Company will also request the banks at an appropriate
time for debt restructuring. Based on the detailed evaluation of the
current situation, plans formulated and active discussions underway
with prospective investors, management is confident of raising adequate
finance, obtaining renewal of the Permit, rescheduling debt and
receiving continued support from the group. Therefore, the management
holds the view that the Company will realize its assets and discharge
liabilities in the normal course of business. Accordingly, the
financial statements have been prepared on the basis that the Company
is a going concern and that no adjustments are required to the carrying
value of assets and liabilities.
11 The Company''s centralized ticket reservation system (CRS) does not
support capture of unearned revenue. Accordingly, such unearned revenue
has been estimated by management by multiplying the estimated aggregate
number of unflown tickets as on the reporting date by an overall
average estimated ticket value. Management is taking continuing steps
to streamline the process of determination of unearned revenue.
12 The Company''s Cargo Revenue Management (CRM) system is yet to
stabilize. Mistakes noticed in revenue recognized, sundry debtors and
other relevant accounts have been corrected to the extent identified.
The Company is of the view that any unadjusted differences will not be
material. Management is taking steps to further streamline the
processes and stabilize the system.
13 Accounting of costs on major repairs and maintenance of its engines:
During the current and certain immediately preceding previous years,
the Company has adopted the exposure draft on Accounting Standard - 10
(Revised) ''Tangible Fixed Assets'' which allows costs on major repairs
and maintenance incurred to be amortized over the incremental life of
the asset. The Company has extended the same treatment to costs and
maintenance on engines pertaining to aircrafts acquired on operating
lease. Such expenditure has been included in ÂLease hold improvements-
Aircrafts'' vide schedule of fixed assets. This accounting policy has
been confirmed by an independent expert and in the opinion of the
management, has resulted in a fair depiction of the working results and
the state of affairs of the company. But for such accounting practice,
the loss before & after tax for the year would have been lower by Rs.
14,298.07 lacs.
14 Use fees payable by the Company in respect of certain assets taken
on operating lease aggregating to Rs. 1,132.52 Lacs ( previous year Rs
6,033.53 lacs) (aggregate amount as at March 31, 2013 Rs. 4,281.74 lacs
after taking into account redeliveries) have in accordance with the
Company''s understanding, been treated as maintenance reserves. In terms
of the Company''s accounting policy, these fees are initially included
under Loans and Advances and are expensed out to the Statement of
Profit and Loss at the time of incurrence of major expenditure
/termination of agreements. The Company is taking steps to formalize
this understanding with the relevant lessor.
15 The Company has not prepared consolidated financial statements (CFS)
as required by the AS 21, since the transactions of subsidiary during
the year/its assets and liabilities were not material.
16 Fixed assets were physically verified by the management during the
previous year. Pending completion of reconciliation, discrepancies, if
any, have not been finalized and adjusted. As a matter of abundant
caution, provision of Rs. 500 lacs has been made for the possible
effect of any discrepancies.
17 Rs. 10,858 lacs representing withholding tax accrued as payable in
the books of account upto March 31, 2011 on amounts paid/ provided as
payable to certain non residents/interest thereon was withdrawn based
on professional advice. Consequently, no provision is considered
necessary for withholding tax for the years 2011-12 and 2012 - 13 on
amounts paid/ provided as payable to certain non residents/interest
thereon. The Company is in the process of completing a part of the
pending documentation and complying with the requisite formalities
under the Income Tax Act, 1961.
18 The consortium banks have sought to recall their entire outstanding
in April 2013. The Company will be disputing such action before an
appropriate forum. Accordingly, the borrowings outstanding to the
consortium banks as at March 31, 2013 have been classified as long term
and current liabilities without taking cognizance of the recall but as
per the schedule of repayments stipulated in the MDRA. Consequently,
the Company has also continued to amortize certain borrowing costs over
the repayment period as per MDRA. Unamortized borrowings costs as at
March 31, 2013 is Rs. 3,021.78 lacs.
19 The licenses for claims of duty free credits (amount recognized as
at March 31, 2013 and included under ÂOther current assets''
Rs.12,740.56 lacs) are yet to be received from relevant authorities.
The Company is taking necessary action on the matter.
20 Segregation between current and non current liabilities /assets as
at end of current and previous reporting periods have been done on an
estimated basis in certain cases due to non availability of precise
data.
21 The Company has terminated certain agreements entered into with
parties as a cost rationalisation measure. Certain parties have also
terminated the agreements entered into with the Company in view of
defaults by it. The Company is in discussion with the relevant parties
to finalise the amount of compensation and other costs, if any payable
by it,as well as to persuade the parties to desist from such
cancellations. The same will be accounted on final determination of the
matter. In the opinion of the management, this amount is not likely to
be material.
22 Previous year''s figures have been regrouped / reclassified wherever
necessary to conform to the current year''s presentation.
Mar 31, 2012
1 Corporate Information
(a) Background
Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited)
("the Company") is engaged in rendering scheduled and unscheduled
aircraft passenger and cargo services, including charter services. The
Company was incorporated on June 15, 1995 as a private limited company
and converted itself into a public limited company on January 31, 2005.
Consequently, the Company changed its name from Deccan Aviation Private
Limited to Deccan Aviation Limited. On June 12, 2006, the Company's
shares were listed on the Bombay Stock Exchange Limited and the
National Stock Exchange Limited, pursuant to the Company's initial
public offer of shares. The scheduled airline business of Kingfisher
Training and Aviation Services Limited ("KTASL") (previously known as
Kingfisher Airlines Limited) demerged on a going concern basis with the
Company, with effect from April 1, 2008 as the demerger appointed date,
vide scheme of arrangement approved by the honourable High Court of
Karnataka vide its order dated June 16, 2008 under sections 391 to 394
of the Companies Act, 1956 ('Scheme"). The helicopter charter division
of the Company was also hived off pursuant to the Scheme. The Company
changed its name from Deccan Aviation Limited to Kingfisher Airlines
Limited, with effect from September 5, 2008.
(b) Demerger of the commercial airline division of KTASL
(i) Order of the Karnataka high court in form 42 of the Companies
(Court) Rules, 1949 in respect of the Scheme is yet to be passed.
(ii) Documentation in respect of transfer of certain assets and
liabilities taken over pursuant to Scheme, to the name of the Company
are pending. The Company is in the process of transfer of charges
created by KTASL to its name in respect of securities granted for loans
so taken over by the Company, in consultation with the Registrar of
Companies.
i Terms of repayment of term loans and others
(i) Secured Loans: Term loan from Banks
Represents the working capital term, rupee term, funded interest term
and additional rupee loans funding granted by the banks as per the MDRA
entered by the Company with the constortuim of banks led by SBI and
repayable w.e.f October 2012 after a moratorium period of two years as
per the laid down repayment schedule. Interest payable at certain %
mark up above the Base rate and to be reset every 2 years.
In case of PDP loans, interest payable at certain % mark up above the
Base rate and to be reset every 2 years and repayable over a period of
six years with effect from September 2010.
Assets taken on Finance Leases
Loans taken for aircrafts purchased on finance leases are repayable
over a period ranging between 9-12 years as per the relevant agreements
entered into with the lessors and carries fixed interest rate ranging
between 5.37% to 7.61% in some cases and variable interest rate @
LIBOR margins for the others.
(ii) Unsecured Loans:
Term loan from Banks
Represents working capital term, rupee term, funded interest term and
additional rupee loans funding granted by certain banks as per the MDRA
entered by the Company with the constortuim of banks led by SBI and
repayable w.e.f October 2012 after a moratorium period of two years as
per the laid down repayment schedule. Interest payable at certain %
mark up above the Base rate and to be reset every 2 years.
Term loan from Others
Loan represents working capital funding by Corporate entities and group
companies carrying interest rate ranging between 7% to 15% and
repayable over a period of 2 to 3 years based on individual agreements
entered with the parties. In certain cases there are no stipulation
fixed for repayment.
d Terms of repayment of term loans and others
(i) Secured Loans from Banks
Cash credit facilities from banks repayable on demand, devolved letters
of credit/guarantees and short term loan facility repayable in 6 months
from the date of availment, which carry an interest rate of certain %
mark up above the base rate at monthly rests.
(ii) Secured Loans from others
Second priority on mortgage of aircraft repayable on demand and carries
an interest rate of 13%.
(iii) Unsecured Loans from Banks
Carries an interest rate of 11% and repayable on demand.
(iv) Unsecured Loans from others
Loan represents working capital funding by Corporate entities and group
companies carrying interest rate ranging between 11% to 18% and
repayable over a period of 2 to 3 years based on individual agreements
entered with the parties.
Additional information:
In respect of following amounts there are repatriation restrictions:
* Includes Cash of Rs.2.87 Lacs (March 31, 2011 - Rs. 2.87 Lacs) on
which restriction is placed by the High Court Of Karnataka.
Particulars As at As at
March 31, 2012 March 31, 2011
Rs. In Lacs Rs. In Lacs
2 Contingent liabilities and Commitments:
(to the extent not provided for)
a) Contingent Liabilities:
i) Claims against the Company 22,514.09 21,923.74
not acknowledged as debts
ii) Guarantees/ Letters of credit 65,952.82 128,636.99
given by banks on behalf of the
Company
iii) Demands raised by Income Tax 1,393.42 1,399.71
authorities under appeal
iv) Demands and show cause 36,905.61 23,392.50
notices raised by service tax
authorities
v) Show cause notices raised by - 14.37
entry tax authorities
vi) Lease rentals payable in respect 27,765.96 16,521.15*
of assets taken on
operating lease in the event
of the Company not meeting
certain contractual obligations
vii) Redelivery and other costs in Not Not
respect of assets taken on ascertainable ascertainable
operating lease at the end of
the lease period
viii) Amounts payable, if any for Not Not
breach of contractual ascertainable ascertainable
obligations
ix) Liability for deduction of tax 35,401.55 21,178.55*
at source on lease payments in
respect of aircrafts and
engines, where agreements
were entered into with lessors
on or before March 31, 2007
(excluding interest)
Remarks
Pertains to litigations filed against the Company which are pending
with various authorities / arbitration, including National Consumer
Disputes Redressal Commission, Consumers' Disputes Forums, Courts,
Civil Court and invoices / claims of suppliers and service providers
not accepted by the Company.
Pertains to guarantees and letters of credit given / issued by banks to
Airport Authorities, lessors, suppliers of spares, stores & components
and others.
An aggregate sum of Rs. 270.95 lacs paid has been included under 'Loans
and Advances'.
The Company has preferred /furnished appeals/objections /is in the
process of replying. Amount indicated does not include any demands that
may be raised for other years, based on the stand taken by tax
authorities in orders passed/show cause notices issued.
The Company has furnished objections.
The Company has taken certain assets from a lessor on operating lease.
The lessor has undertaken to waive the lease rentals in the event the
Company meets certain contractual obligations. The Company has
requested for extension of time to meet certain obligations. The
Company is confident that its request for extention of time will be
accepted and that it will meet the obligations within the extended
time.
In respect of operating leases, the Company is required to return the
aircrafts as per prescribed terms. However, the lease periods are
extendable for a longer period and considering on going maintenance of
aircrafts, a reliable estimate cannot be made of the redelivery costs.
(a) Financial claims, if any, in respect of certain lease agreements
terminated have not been received. Liability in this respect, if any,
is not ascertainable.
(b) Certain creditors have claimed interest for late payment of dues.
The Company is negotiating with these parties to waive such interest.
The Company is confident that its request will be accepted and
accordingly no provision is made for the same.
a) The Company has filed applications under section 10(15A) of the
Income Tax Act, 1961 with the Central Board of Direct Taxes (CBDT)
seeking exemption from deduction of tax, which are pending. These are
being followed up by the Company.
b) In respect of agreements involving tax of Rs.9,730.67 Lacs up to
March 31, 2011, applications made by the Company have been rejected. In
respect of certain agreements, the Company has filed writs before the
Delhi High Court. In respect of others, the Company will do so shortly.
* Recast
The Company has entered into agreements for purchase of aircrafts /
engines under which the Company has commitments to purchase aircrafts /
engines over a period stipulated in the agreements. Such agreements
involve complex pricing arrangements wherein the Company receives
discounts / credits on such purchases, which are based on the
commitments to purchase, which the Company is confident to fulfil
currently. Accordingly, amount of contingent liability, if any, as at
the balance sheet date is not ascertainable.
In addition to the above, there are certain arbitration proceedings
with customers / suppliers / contractors, in respect of which claims
are currently not ascertainable.
The management believes, based on internal assessment and / or legal
advice, that the probability of an ultimate adverse decision and
outflow of resources of the Company is not probable and accordingly, no
provision for the same is considered necessary.
3 (a) Buildings constructed at a cost of Rs. 88.74 Lacs are on land
rented from the State Government, for which lease has been transferred
to Deccan Charters Limited (DCL). Such rental agreement is renewable on
an annual basis. The Company has in turn entered into a rental
arrangement with DCL.
(b) Buildings constructed at a cost of Rs. 865.86 Lacs are on land
belonging to the Airport Authority of India. Such rental agreements are
renewable on a periodical basis.
An aircraft wise schedule of interest capitalized is under preparation
and review. The Company is in the process of renegotiating the delivery
terms of aircrafts with the relevant manufacturers. Any amounts to be
decapitalized consequent to temporary suspension of work will be
accounted after such renegotiation.
(b) Capital advances includes Rs. 2,402.51 lacs paid for purchase of a
flight simulator. The Company is to pay the balance consideration and
take delivery of the asset. The Company is exploring various options to
fund the balance consideration payable. Management is confident that it
will be in a position to fund the balance consideration & take delivery
of the flight simulator. Accordingly, the said amount is considered
good of recovery.
4 Employee Stock Option Plan [ESOP]
On March 16, 2005, the shareholders of the Company approved an employee
stock option plan [ESOP 2005]. Further on December 21, 2005, the Board
of Directors approved the ESOP 2006 scheme, which will govern issuance
of options on or after January 1, 2006. Options issued under ESOP 2005
would continue to be governed under ESOP 2005. The shareholders have
approved the issuance of 8,181,779 options in aggregate subject to a
maximum of 10% of the aggregate number of issued and outstanding equity
shares (calculated on an as converted basis), under both the options
put together.
The Company has not issued any options during the year. Accordingly,
the assumptions used in determination of the fair value of the
Company's stock options for pro forma net loss per share disclosures
using the Black-Scholes option-pricing model have not been furnished.
The Board of Directors of the Company are yet to formulate the stock
option plan to the employees of the commercial airline division of
KTASL taken over by the Company, pursuant to clause 11.1 of the Scheme.
* * UBIPL
# KFIL
@ KTASL
## UBSN Limited
% Bangalore Beverages Limited
$ conversion of interest & other dues payable as loan of Rs. 9,239.00
Lacs and Rs. 2,370.00 Lacs respectively.
$$ Dr. Vjay Mallya
& Excludes amortization of amounts paid in prior years of Rs. 221.69
Lacs
A Entitled to free use of Company car & telephone. Excludes accrued
leave encashment and gratuity since the same have been recognized for
the Company as a whole and cannot be determined at an employee level.
NA: Not applicable
In addition the Company has derived revenue from certain related
parties from sale of tickets / cargo space in the normal course of
business. These have not been quantified & shown separately.
b Rs. 2,678.50 lacs representing commission for the period from January
1, 2011 to March 31, 2011 earlier accrued as payable in the books of
account to the guarantors for issuing guarantees at the request of the
Company to its banker's / others has been withdrawn pursuant to
directives of the consortium bankers pursuant to the Reserve Bank of
India's Guidelines. Further, for the same reason, no provision has been
made in the books of account for commission payable in respect of
guarantees issued by the guarantors to the Company's bankers / others
for the year, estimated at Rs.11,093.80 lacs. The Company has
communicated the matter to the concerned guarantors and their response
is awaited.
5 Leases and Hire Purchase
The Company has entered into operating and finance lease agreements.
Disclosures required under AS 19 on "Leases" is as given below:
(a) Operating leases
Operating lease arrangements comprise of leases of aircraft,
helicopters, spare engines and office premises. The salient features of
such lease agreements are as follows:
1) Lease periods range up to twelve years and are in certain cases
non-cancellable.
2) Lease rentals are usually fixed over the term of the lease while
some arrangements are subject to adjustments linked to the Libor rates
movements.
3) The Company also has agreements for maintenance and lease of stores
and spares for such aircrafts for which fixed and variable rentals are
paid. Variable rentals are paid on a pre determined rate payable on the
basis of actual flying hours / cycles. Such variable rentals are
subject to annual escalations as stipulated in the agreements. However,
the Company is eligible to claim reimbursement of maintenance costs to
the extent eligible under the agreements.
4) The Company does not have an option to buy the aircraft or
helicopters and spare engines or to renew the leases.
5) In case of default by the Company, in addition to repossession of
the aircraft, penalties are stipulated in the agreements.
6) The Company is required to deposit a commitment fee and a security
deposit with the lessor or provide a letter of credit for such amounts.
In addition to the above, the Company has entered into agreements to
lease aircrafts / engines in respect of which the aircrafts / engines
are pending delivery / the lease was yet to commence as at March 31,
2012. The above table of minimum lease payments does not include
amounts that may become payable in respect of leases yet to commence as
at March 31, 2012.
Salient features of Finance Lease Agreement (Aircraft):
1) Monthly aircraft lease rentals are paid in the form of fixed
rentals.
2) The Company is responsible for keeping the aircraft airworthy in all
respects and in good condition and insuring the same throughout the
lease period.
3) The Company has an option to purchase the aircraft either during the
term of the lease on payment of the outstanding principal amount or at
the end of the lease term on payment of a nominal option price.
4) In the event of default, the Lessee is responsible for payment of
all costs of the Owner including financing costs, and other associated
costs. Further, a right of repossession is available to the Owner /
Lessor.
In addition, the Company has entered into cancellable leasing
arrangements for office and residential premises which are renewable at
mutual consent. Lease rentals of Rs.4,100.03 lacs (Previous year -
Rs.4,854.44 Lacs) have been included under the head "Operating and
Other Expenses - Rent" in the Statement of Profit and Loss.
The value of assets and liabilities, capital expenditure incurred
during the year and depreciation on fixed assets segment wise cannot be
segregated and identified to any reportable segment.
Note: All data in note 38(a) is as certified by management, since part
of the data is drawn from non-financial records.
(b) Business segments
The Company operates in a single business segment, i.e. of providing
scheduled and unscheduled air transportation services. Accordingly, no
separate segment disclosures for business segments are required to be
given.
6 Deferred tax asset on unabsorbed depreciation and business losses
has been recognized on the basis of business plan prepared by the
management, which takes into account certain future receivables arising
out of contractual obligations. The management is of the opinion that
there is virtual certainty supported by convincing evidence that
sufficient future taxable income will be available against which the
deferred tax asset can be realized.
7 Provisions
In accordance with Accounting Standard - 29 'Provisions, Contingent
Liabilities and Contingent Assets', following is the movement in
provision towards cost for frequent flyer program.
(a) Frequent Flyer Program:
The Company has a Frequent Flyer Program (King Club), wherein
passengers who fly frequently are entitled to accumulate miles to their
credit. Passengers are eligible to redeem such miles in the form of
tickets, either on the Company or its partners' airlines. The cost of
allowing free travel to members is accounted considering the members'
accumulated mileage on an incremental basis. However, in the light of
inadequate historical data, the Company has not factored costs that
would be incurred by it while estimating provisions required, in case
eligible passengers redeem such miles for services/tickets of partners.
The movement in the provision towards cost for frequent flyer program
during the year is as under:
(b) Contribution to defined contribution plans
Contribution to provident fund Rs.673.66 Lacs (Previous year - Rs.
641.76* Lacs).
Contribution to social security schemes Rs.214.71 Lacs (Previous year -
Rs. 200.01 Lacs).
* Recast
8 The Company is not aware of the registration status of its suppliers
registration under the MSME Act, 2006 ("Micro Small and Medium
Enterprises Development Act 2006"). Accordingly, information relating
to outstanding balances due have not been disclosed as it is not
determinable. Similarly, interest payable if any, has not been computed
and provided for.
9 Accounts of certain creditors, debtors, IATA, loans & advances,
advances on capital account, bank accounts, passenger service fees and
charges payable to airport operators, service tax payable (including
under reverse mechanism), input service tax credit recognized are
subject to review / reconciliation / confirmation. Adjustments, if any
will be made on completion of such review / reconciliation / receipt of
confirmations/identification of doubtful and bad debts/advances.
10 The Company has incurred substantial losses and its net worth has
been eroded. The Company has initiated several cost savings schemes/
route rationalization programs and has prematurely terminated certain
contracts etc. The Company has also drawn up plans for capital raising
and will request banks at an appropriate time for debt restructuring.
These plans are material to it continuing as a going concern. Since the
Company is confident of raising capital and rescheduling its debt and
in the light of continued group support, the financial statements have
been prepared on the basis that the Company is a going concern and that
no adjustments are required to the carrying value of assets and
liabilities.
11 The Company's centralized ticket reservation system (CRS) does not
support capture of unearned revenue. Accordingly, such unearned revenue
has been estimated by management by multiplying the estimated aggregate
number of unflown tickets as on the reporting date by an overall
average estimated ticket value. Management is taking continuing steps
to streamline the process of determination of unearned revenue.
12 The Company's Cargo Revenue Management (CRM) system is yet to
stabilize. Mistakes noticed in revenue recognized, sundry debtors and
other relevant accounts have been corrected to the extent identified.
The Company is of the view that any unadjusted differences will not be
material. Management is taking steps to further streamline the
processes and stabilize the system.
13 Accounting of costs on major repairs and maintenance of its engines:
During the current and immediately preceeding previous two years, the
Company has adopted the exposure draft on Accounting Standard - 10
(Revised) 'Tangible Fixed Assets' which allows costs on major repairs
and maintenance incurred to be amortized over the incremental life of
the asset. The Company has extended the same treatment to costs and
maintenance on engines pertaining to aircrafts acquired on operating
lease. Such expenditure has been included in 'Lease hold improvements-
Aircrafts' vide schedule of fixed assets. This accounting policy has
been confirmed by an independent expert and in the opinion of the
management, has resulted in a fair depiction of the working results and
the state of affairs of the Company. But for such accounting practice,
the loss before & after tax for the year would have been higher by Rs.
59.33 Lacs and Rs. 40.08 Lacs respectively.
14 Use fees payable by the Company in respect of certain assets taken
on operating lease aggregating to Rs. 6,033.53 Lacs (previous year Rs
5,576.45 lacs) have, in accordance with the Company's understanding,
been treated as maintenance reserves. In terms of the Company's
accounting policy, these fees are initially included under Loans and
Advances and are expensed out to the Statement of Profit and Loss at
the time of incurrence of major expenditure /termination of agreements.
The Company is taking steps to formalize this understanding with the
relevant lessor.
15 The Company has not prepared consolidated financial statements (CFS)
as required by the AS 21, since the transactions of subsidiary during
the year/its assets and liabilities were not material.
16 Fixed assets were physically verified by the management during the
previous year. Pending completion of reconciliation, discrepancies, if
any, have not been finalized and adjusted. As a matter of abundant
caution, provision of Rs. 500 lacs has been made for the possible
effect of any discrepancies.
17 Rs. 10,858 lacs representing withholding tax earlier accrued as
payable in the books of account on amounts paid/ provided as payable to
certain non residents/interest thereon has been withdrawn based on
professional advice. Consequently, no provision is considered necessary
for withholding tax for the year 2011-12 on amounts paid/ provided as
payable to certain non residents/interest thereon. The Company is in
the process of completing a part of the pending documentation and
complying with the requisite formalities under the Income Tax Act,
1961.
18 In respect of certain aircrafts taken on finance lease (book value
as at March 31, 2012 Rs.24,626.96 lacs) (finance lease obligation
outstanding as at March 31, 2012 Rs.21,706.41 lacs), the concerned
lessors have terminated the relevant lease agreements in the light of
events of default by the Company and the aircrafts stand deregistered
from its name in April 2012. The Company is in the process of
negotiation with the concerned lessors to purchase the aircrafts.
Pending finalization, no adjustments have been made in the financial
statements.
19 Claims for duty free credits (amount recognized as at March 31, 2012
and included under 'Other current assets' Rs.12,740.56 lacs) are yet to
be lodged with the relevant authorities. The Company will take
necessary action in the matter.
20 Segregation between current and non current liabilities /assets as
at end of current and previous reporting periods have been done on an
estimated basis in certain cases due to non availability of precise
data.
21 The Company has terminated certain agreements entered into with
parties as a cost rationalisation measure. The Company is in discussion
with the relevant parties to finalise the amount of compensation and
other costs, if any payable by it. The same will be accounted on final
determination of the matter. In the opinion of the management, this
amount is not likely to be material.
22 Loans and advances include Rs 2,064.14 lacs ( Previous year 1,489.87
lacs) representing sums recovered by certain creditors on account of
Company's delay in payment of tax deducted at source. The Company is in
discussion with the relevant parties, to resolve the matter. In the
opinion of the management, no adjustment are required to the financial
statements on this account.
23 Previous year's figures have been regrouped / reclassified wherever
necessary to conform to the current year's presentation.
Mar 31, 2011
1. Background
Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited)
("the Company") is engaged in rendering scheduled and unscheduled
aircraft passenger and cargo services, including charter services. The
Company was incorporated on June 15, 1995 as a private limited company
and converted itself into a public limited company on January 31, 2005.
Consequently, the Company changed its name from Deccan Aviation Private
Limited to Deccan Aviation Limited. On June 12, 2006, the Company's
shares were listed on the Bombay Stock Exchange Limited and the
National Stock Exchange Limited, pursuant to the Company's initial
public offer of shares. The scheduled airline business of Kingfisher
Training and Aviation Services Limited ("KTASL") (previously known as
Kingfisher Airlines Limited) demerged on a going concern basis with the
Company, with effect from April 1, 2008 as the demerger appointed date,
vide scheme of arrangement approved by the honourable High Court of
Karnataka vide its order dated June 16, 2008 under sections 391 to 394
of the Companies Act, 1956 ('Scheme"). The helicopter charter division
of the Company was also hived off pursuant to the Scheme. The Company
changed its name from Deccan Aviation Limited to Kingfisher Airlines
Limited, with effect from September 5, 2008.
2. Demerger of the commercial airline division of KTASL
a) Order of the Karnataka High Court in form 42 of the Companies
(Court) Rules, 1949 in respect of the Scheme is yet to be passed.
b) Documentation in respect of transfer of certain assets and
liabilities taken over pursuant to Scheme, to the name of the Company
are pending. The Company is in the process of transfer of charges
created by KTASL to its name in respect of securities granted for loans
so taken over by the Company, in consultation with the Registrar of
Companies.
2. Commitments and contingent liabilities not provided for:
(Rs. in Lacs)
As at As at
Particulars Remarks
March 31, 2011 March 31, 2010
a. Estimated
amount of contracts 2,227,287.48 2,267,640.57 Pertains to
acquisition of
aircrafts &
remaining to be
executed on capital other capital assets
in future.
account and not
provided for (net of
advances) & as
certified by
management
b. Guarantees /
letters of credit
given 128,636.99 71,331.52 Pertains to
guarantees and
letters of
by banks on behalf
of the Company credit given /
issued by banks to
Airport Authorities,
lessors, suppliers of
spares, stores &
components and others.
c. Claims against
the Company not 21,923.74 26,418.00* Pertains to
litigations filed
against
acknowledged as debts
(including the Company which are
pending
civil and customer
suits) in the normal with various
authorities /
arbitration,
course of business
(to the extent including National
Consumer Disputes
ascertainable) Redressal Commission,
Consumers'
Disputes Forums,
Courts, Civil Court
and invoices / claims
of suppliers and
service providers not
accepted by the
Company. The Company
has a claim against
one of the parties to
an extent of Rs. Nil
(as at March 31, 2010
Rs. 10,100.00 Lacs).
d. Demands raised by
Income Tax 1,399.71 1,336.84 An aggregate sum of
Rs. 1,060.17 lacs
authorities under
appeal paid has been included
under 'Loans and
Advances'.
e. Demands and show
cause notices raised 23,392.50 6,928.51* The Company has
preferred/furnished
by service tax
authorities appeals/ objections
/is in the process
of replying. Amount
indicated does not
include any demands
that may be raised
for other years, based
on the stand taken by
tax authorities in
orders passed/show
cause notices issued.
f. Show cause notices
raised by entry tax 14.37 Nil The Company has
furnished objections.
authorities
g. Lease rentals
payable in respect of 13,216.86 Nil The Company has
taken certain assets
assets taken on
operating lease in the from a lessor on
operating lease. The
event of the Company
not meeting lessor has undertaken
to waive the
certain contractual
obligations lease rentals in the
event the Company
meets certain
contractual
obligations.
The Company is
confident of meeting
these obligations
h. Redelivery and other
costs in respect of Not Not In respect of
operating leases, the
assets taken on operating
lease at the ascertai
-nable ascertai
-nable Company is required
to return the
end of the lease period aircrafts as per
prescribed terms.
However, the lease
periods are
extendable for a
longer period and
considering on going
maintenance of
aircrafts, a reliable
estimate cannot be
made of the
redelivery costs.
i. Amounts payable, if
any for breach of Not Not
contractual obligations ascertai
-nable ascertai
-nable
j. Liability for
deduction of tax at
source 17,993.99 8,644.15 a) The Company has
filed applications
on lease payments in
respect of aircrafts under section 10(15A)
of the Income
and engines, where
agreements were Tax Act, 1961 with
the Central Board
entered into with
lessors on or before of Direct Taxes (CBDT)
seeking
March 31, 2007
(excluding interest) exemption from
deduction of tax,
which are pending.
These are being
followed up by the
Company.
b) In respect of
agreements involving
tax of Rs.6,019.06
Lacs up to March
31, 2011, applications
made by the Company
have been rejected.
In respect of certain
agreements, the
Company has filed
writs before the
Delhi High Court. In
respect of others,
the Company will do so
shortly.
k. True up charges payable
to a service Nil 2,608.87 Based on legal advice
the Company
provider (difference between has disputed the
amount of the said
guaranteed volume of
business and charges payable as
computed by the
actual) service provider and
has sought refund
of amounts paid,
wherever applicable.
The Company has also
contended that the
relief agreement
executed is not
binding. Amount paid
so far has been
included in loans and
advnces. Such claim
of the Company has
been disputed by the
concerned service
provider. The Company
is in the process of
examining options
open to it in the
matter.
l. Lease rentals claimed
by a vendor in Nil 4,596.57 Certain aircraft
engines supplied by
respect of spare engines
supplied not a vendor failed
prematurely and the
acknowledged as debt Company has incurred
substantial amounts
on repair and
overhaul of the
same. Pending repair
and overhaul of the
said engines, the
Company has taken
certain spare engines
on lease from the
said vendor. The
Company has preferred
claims against the
said vendor and has
requested the party
to conclude
arrangements to
settle matter at
zero cost to it. The
party has submitted,
without prejudice, a
term sheet for
settlement of the
matter, which
envisages waiver of
the lease rentals
payable.
m. Arrears of fixed
cumulative preference 4,305.89 Nil Arrears of fixed
cumulative
dividends (including
tax thereon) preference dividends
on CCPS (till date of
conversion) and
cumulative redeemable
preference shares and
tax thereon.
The Company has entered into agreements for purchase of aircrafts /
engines under which the Company has commitments to purchase aircrafts /
engines over a period stipulated in the agreements. Such agreements
involve complex pricing arrangements wherein the Company receives
discounts / credits on such purchases, which are based on the
commitments to purchase, which the Company is confident to fulfill
currently. Accordingly, amount of contingent liability, if any, as at
the balance sheet date is not ascertainable.
In addition to the above, there are certain arbitration proceedings
with customers / suppliers / contractors, in respect of which claims
are currently not ascertainable.
The management believes, based on internal assessment and / or legal
advice, that the probability of an ultimate adverse decision and
outflow of resources of the Company is not probable and accordingly, no
provision for the same is considered necessary.
3. a) Buildings constructed at a cost of Rs. 88.74 Lacs are on land
rented from the State Government, for which lease has been transferred
to Deccan Charters Limited (DCL). Such rental agreement is renewable on
an annual basis. The Company has in turn entered into a rental
arrangement with DCL.
b) Buildings constructed at a cost of Rs. 865.86 Lacs are on land
belonging to the Airport Authority of India. Such rental agreements are
renewable on a periodical basis.
b) Capital work in progress includes Rs. 2,098.25 lacs paid for
purchase of a flight simulator. The Company is to pay the balance
consideration and take delivery of the asset. The Company is exploring
various options to fund the balance consideration payable. Management
is confident that it will be in a position to fund the balance
consideration & take delivery of the flight simulator. Accordingly, the
said amount is considered good of recovery.
4. Employee Stock Option Plan [ESOP]
On March 16, 2005, the shareholders of the Company approved an employee
stock option plan [ESOP 2005]. Further on December 21, 2005, the Board
of Directors approved the ESOP 2006 scheme, which will govern issuance
of options on or after January 1, 2006. Options issued under ESOP 2005
would continue to be governed under ESOP 2005. The shareholders have
approved the issuance of 8,181,779 options in aggregate subject to a
maximum of 10% of the aggregate number of issued and outstanding equity
shares (calculated on an as converted basis), under both the options
put together.
The Company has not issued any options during the year. Accordingly,
the assumptions used in determination of the fair value of the
Company's stock options for pro forma net loss per share disclosures
using the Black-Scholes option-pricing model have not been furnished.
The Board of Directors of the Company are yet to formulate the stock
option plan to the employees of the commercial airline division of
KTASL taken over by the Company, pursuant to clause 11.1 of the Scheme.
5. Related Party Disclosures (Parties identified by the Management
and relied upon by the auditors): Names of related parties
Holding Company United Breweries (Holdings) Limited
Fellow Subsidiaries Kingfisher Finvest India Limited (KFIL)
(formerly known as Kingfisher Radio Limited and subsequently renamed as
Kingfisher Finvest India Limited)
UB Infrastructure Projects Limited (UBIPL)
Kingfisher Training and Aviation Services Limited (KTASL)
UBSN Limited Subsidiary of the Company Vitae India Spirits Limited
Key Management Personnel (KMPs) Dr. Vijay Mallya
Mr. Sanjay Aggarwal (from September 27, 2010)
6. Leases and Hire Purchase
a) The Company has entered into operating and finance lease agreements.
Disclosures required under AS 19 on "Leases" is as given below:
Operating leases
Operating lease arrangements comprise of leases of aircraft,
helicopters and spare engines. The salient features of such lease
agreements are as follows:
- Lease periods range up to twelve years and are usually
non-cancelable.
- Lease rentals are usually fixed over the term of the lease while some
arrangements are subject to adjustments linked to the Libor rates
movements.
- The Company also has agreements for maintenance and lease of stores
and spares for such aircrafts for which fixed and variable rentals are
paid. Variable rentals are paid on a pre determined rate payable on the
basis of actual flying hours / cycles. Such variable rentals are
subject to annual escalations as stipulated in the agreements.
However, the Company is eligible to claim reimbursement of maintenance
costs to the extent eligible under the agreements.
- The Company does not have an option to buy the aircraft or
helicopters and spare engines or to renew the leases.
- In case of default by the Company, in addition to repossession of the
aircraft, penalties are stipulated in the agreements.
- The Company is required to deposit a commitment fee and a security
deposit with the lessor or provide a letter of credit for such amounts.
In addition to the above, the Company has entered into agreements to
lease aircrafts / engines in respect of which the aircrafts / engines
are pending delivery / the lease was yet to commence as at March 31,
2011. The above table of minimum lease payments does not include
amounts that may become payable in respect of leases yet to commence as
at March 31, 2011.
Salient features of Finance Lease Agreement (Aircraft):
- Monthly aircraft lease rentals are paid in the form of fixed rentals.
- The Company is responsible for keeping the aircraft airworthy in all
respects and in good condition and insuring the same throughout the
lease period.
- The Company has an option to purchase the aircraft either during the
term of the lease on payment of the outstanding principal amount or at
the end of the lease term on payment of a nominal option price.
- In the event of default, the Lessee is responsible for payment of all
costs of the Owner including financing costs, and other associated
costs. Further, a right of repossession is available to the Owner /
Lessor.
b) In addition, the Company has entered into cancelable leasing
arrangements for office and residential premises which are renewable at
mutual consent. Lease rentals of Rs. 4,854.44 lacs (Previous year - Rs.
5,477.55 Lacs) have been included under the head "Operating and Other
Expenses - Rent" under Schedule 16 in the Profit and Loss Account.
7. Segment disclosures
a) Geographical segments à Considering the internal reporting
framework, the Company has considered geographical segments as the
primary segments. Such segments consist of domestic air transportation
within India and international air transportation outside India.
b) Business segments
The Company operates in a single business segment, i.e. of providing
scheduled and unscheduled air transportation services. Accordingly, no
separate segment disclosures for business segments are required to be
given.
8. Provisions
In accordance with Accounting Standard - 29 'Provisions, Contingent
Liabilities and Contingent Assets', following is the movement in
provision towards cost for frequent flyer program.
The outflow with regard to above would depend upon utilization of
accumulated mileage by the members and hence, the Company is not able
to reasonably ascertain the timing of outflow.
9. The Company is not aware of the registration status of its
suppliers regarding registration under the MSME Act, 2006 ("Micro Small
and Medium Enterprises Development Act 2006"). Accordingly, information
relating to outstanding balance or interest due have not been disclosed
as it is not determinable.
10. Accounts of certain creditors, debtors, loans & advances, advances
on capital account, bank accounts, passenger service fees and charges
payable to airport operators, service tax payable (including under
reverse mechanism) , input service tax credit recognized are subject to
review / reconciliation / confirmation. Adjustments, if any will be
made on completion of such review / reconciliation / receipt of
confirmations.
11. The Company has incurred substantial losses and its net worth has
been eroded. However, having regard to improved passenger and cargo
load in recent months, improvement in economic sentiment and business
prospects, cost savings schemes being implemented, premature
termination of certain lease / purchase contracts, recently launched
international routes, route rationalization programs, the master debt
recast agreement signed with banks in December 2010, augmentation of
capital by conversion of a part of loans from banks and group
companies, capital raising plans etc, the financial statements have
been prepared on the basis that the Company is a going concern and that
no adjustments are required to the carrying value of assets and
liabilities.
12. The Company's centralized ticket reservation system (CRS) does not
support captured of unearned revenue. Accordingly, such unearned
revenue has been estimated by management by multiplying the estimated
aggregate number of unflown tickets as on the reporting date by the
average estimated tickets value prevailing in each of the months to
which such unflown ticket relate to. Management is taking continuing
steps to streamline the process of determination of unearned revenue.
13. The Company's Cargo Revenue Management (CRM) system is yet to
stabilized. Mistakes noticed in revenue recognized, sundry Debtors and
other relevant accounts have been corrected to the extent identified.
The Company's of the view that unadjusted differencies will not be
material. Management is taking steps to further steemline the process
in stabilized system.
14. Accounting of costs on major repairs and maintenance of its
engines: During the current and immediate previous year, the Company
has adopted the exposure draft on Accounting Standard - 10 (Revised)
'Tangible Fixed Assets' which allows costs on major repairs and
maintenance incurred to be amortized over the incremental life of the
asset. The Company has extended the same treatment to costs and
maintenance on engines pertaining to aircrafts acquired on operating
lease. Such expenditure has been included in 'Lease hold improvements-
Aircrafts' vide schedule of fixed assets. This accounting policy has
been confirmed by an independent expert and in the opinion of the
management, has resulted in a fair depiction of the working results and
the state of affairs of the company. But for such accounting practice,
the loss before & after tax for the year would have been higher by Rs.
3,726.83 Lacs and Rs. 2,517.66 Lacs respectively.
15. Use fees payable by the Company in respect of certain assets taken
on operating lease aggregating to Rs. 5,576.45 lacs have, in accordance
with the Company's understanding, been treated as maintenance reserves.
In terms of the Company's accounting policy, these fees are initially
included under Loans and Advances and are expensed out to the Profit
and Loss Account at the time of incurrence of major expenditure
/termination of agreements. The Company is taking steps to formalize
this understanding with the relevant lessor.
16. The Company has not prepared consolidated financial statements
(CFS) as required by the AS 21, since the transactions of subsidiary
during the year/its assets and liabilities were not material.
17. Fixed assets have been physically verified by the management
during the year. Pending completion of reconciliation, discrepancies,
if any, have not been finalized and adjusted. As a matter of abundant
caution, provision of Rs. 500 lakhs has been made for the possible
effect of any discrepancies.
18. Previous year's figures have been regrouped / reclassified
wherever necessary to conform to the current year's presentation.
Mar 31, 2010
1. Background
Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited)
("the Company") is engaged in rendering scheduled and unscheduled
aircraft passenger and cargo services, including charter services. The
Company was incorporated on June 15, 1995 as a private limited company
and converted itself into a public limited company on January 31, 2005.
Consequently, the Company changed its name from Deccan Aviation Private
Limited to Deccan Aviation Limited. On June 12, 2006, the Companys
shares were listed on the Bombay Stock Exchange Limited and the
National Stock Exchange Limited, pursuant to the Companys initial
public offer of shares. The scheduled airline business of Kingfisher
Training and Aviation Services Limited ("KTASL") (previously known as
Kingfisher Airlines Limited) demerged on a going concern basis with the
Company, with effect from April 1, 2008 as the demerger appointed date,
vide scheme of arrangement approved by the honourable High Court of
Karnataka vide its order dated June 16, 2008 under sections 391 to 394
of the Companies Act, 1956 ("Scheme"). The helicopter charter division
of the Company was also hived off pursuant to the Scheme. The Company
changed its name from Deccan Aviation Limited to Kingfisher Airlines
Limited, with effect from September 5, 2008.
2. Demerger of the commercial airline division of KTASL
a) Pending payment of stamp duty, order of the Karnataka High Court in
form 42 of the Companies (Court) Rules, 1949 in respect of the Scheme
is yet to be passed.
b) Documentation in respect of transfer of certain assets and
liabilities taken over pursuant to Scheme, to the name of the Company
are pending. The Company is in the process of transfer of charges
created by KTASL to its name in respect of securities granted for loans
so taken over by the Company, in consultation with the Registrar of
companies.
3. Share Capital
During the year, the Company has allotted Nil (year ended March 31,
2009 - 77,030) Equity Shares under the Employee Stock Option Plan.
4. Commitments and contingent liabilities not provided for:
(Rs. in Lacs)
Particulars As at As at Remarks
March 31, 2010 March 31, 2009
a. Estimated 2,267,640.57 2,675,229.60 Pertains to
amount of acquisition
contracts of aircrafts
remaining to & other
be executed capital
on capital assets in
account and future.
not provided
for (net of
advances) &
as certified
by management
b. Guarantees / 71,331.52 74,435.97 Pertains to
letters of guarantees
credit given and letters
by banks on of credit
behalf of the given /
Company issued by
banks to
Airport
Authorities,
lessors,
suppliers of
spares,
stores &
components
and others.
c. Claims against 33,346.51 40,550.16 Pertains to
the Company litigations
not filed against
acknowledged the Company
as debts which are
(including pending
civil and with various
customer authorities /
suits) in the arbitration,
normal course including
of business National
(to the extent Consumer
ascertainable) Disputes
Redressal
Commission,
Consumers
Disputes
Forums,
Courts, Civil
Court and
invoices /
claims of
suppliers and
service
providers not
accepted by
the Company.
The Company
has a claim
against one
of the
parties to
an extent of
Rs.10,100.00
Lacs (as at
March 31,
2009
Rs.10,100.00
Lacs).
d. Demands 1,336.84 2,721.55 Pertains to
raised by tax disputes with
authorities tax
against which authorities.
the Company The Company
has preferred has filed
appeals necessary
appeals.
e. Claims by Nil 21,316.38 -
ex-lessors not
acknowledged
as debt
f. Redelivery and
other costs in
respect of Not Not ln respect of
assets taken ascertainable ascertainable operating
on operating leases, the
lease at the Company is
required to
return the
end of the
lease period
aircrafts as
per prescribed
terms.However,
the lease
periods are
extendable
for a longer
period and
considering
on going
maintenance of
aircrafts, a
reliable
estimate
cannot be
made of the
redelivery
costs.
g. (Amounts Not Not -
payable, if ascertainable ascertainable
any for
breach of
contractual
obligations
h. Liability for 8,644.15 5,808.34 The Company
deduction of has filed
tax at source applications
on lease under section
payments in 10(15A) of
respect of the Income
aircrafts Tax Act, 1961
and engines, with the
where Central Board
agreements of Direct
were entered Taxes seeking
into with exemption
lessors on from deduction
or before of tax, which
March 31, are pending.
2007 These are
(excluding being followed
interest) up by the
Company. In
respect of
agreements
involving tax
of Rs.3,614.10
Lacs upto
March 31,2010,
applications
made by the
Company have
been rejected.
The Company
has made
represent
ations to
reconsider
the matter.
i. True up 2,608.87 1,244.19 Based on legal
charges advice, the
payable Company
to a service has disputed
provider the amount
(difference of the said
between charges
guaranteed payable as
volume of computed by
business and the service
actual) provider and
has sought
refund of
amounts paid,
wherever
applicable.
The Company
has also
contended
that the
relief
agreement
executed is
not binding.
Amount paid so
far has been
included in
loans and
advances.
Such claim of
the Company
has been
disputed by
the concerned
service
provider. The
Company is in
the process of
examining
options open
to it in the
matter.
j. Lease rentals 4,596.57 Nil Certain
claimed by a aircraft
vendor in engines
respect of supplied by
spare engines a vendor
supplied not failed
acknowledged prematurely
as debt and the
Company has
incurred
substantial
amounts on
repair and
overhaul of
the same.
Pending
repair and
overhaul of
the said
engines, the
Company has
taken certain
spare engines
on lease from
the said
vendor. The
Company has
preferred
claims against
the said
vendor and has
requested the
party to
conclude
arrangements
to settle
matter at
zero cost to
it. The party
has submitted,
without
prejudice, a
term sheet for
settlement of
the matter,
which
envisages
waiver of the
lease rentals
payable.
The Company has entered into agreements for purchase of aircrafts /
engines under which the Company has commitments to purchase aircrafts /
engines over a period stipulated in the agreements. Such agreements
involve complex pricing arrangements where in the Company receives
discounts / credits on such purchases, which are based on the
commitments to purchase, which the Company is confident to fulfill
currently. Accordingly, amount of contingent liability, if any, as at
the balance sheet date is not ascertainable.
In addition to the above, there are certain arbitration proceedings
with customers / suppliers / contractors, in respect of which claims
are currently not ascertainable.
The management believes, based on internal assessment and / or legal
advice, that the probability of an ultimate adverse decision and
outflow of resources of the Company is not probable and accordingly, no
provision for the same is considered necessary.
5. a) Buildings constructed at a cost of Rs. 88.74 Lacs are on land
rented from the State Government, for which lease has been transferred
to Deccan Charters Limited (DCL). Such rental agreement is renewable on
an annual basis. The Company is in the process of entering into an
appropriate arrangement with DCL.
b) Buildings constructed at a cost of Rs. 865.86 Lacs are on land
belonging to the Airport Authority of India. Such rental agreements are
renewable on a periodical basis.
6. Employee Stock Option Plan [ESOP]
On March 16, 2005, the shareholders of the Company approved an employee
stock option plan [ESOP 2005]. Further on December 21, 2005,the Board
of Directors approved the ESOP 2006 scheme, which will govern issuance
of options on or after January 1, 2006. Options issued under ESOP 2005
would continue to be governed under ESOP 2005. The shareholders have
approved the issuance of 8,181,779 options in aggregate subject to a
maximum of 10% of the aggregate number of issued and outstanding equity
shares (calculated on an os converted basis), under both the options
put together.
The weighted average contractual remaining life of the options is 6.69
years as at March 31, 2010.
The Board of Directors of the Company are yet to formulate the stock
option plan to the employees of the commercial airline division of
KTASL taken over by the Company, pursuant to clause 11.1 of the Scheme.
Remuneration paid to directors is disclosed in the note 6 above.
Salaries paid during the year 2009-2010 Rs. 9.02 Lacs (Previous year-
Rs. 15.15 Lacs), to a relative of a director of the Company.
Some of the key managerial personnel have given personal guarantees. In
addition to key managerial personnel, their relatives have offered
collateral securities to banks and financial institutions against the
loans taken by the Company from such banks and financial institutions.
In addition the Company has derived revenue from certain related
parties from sale of tickets / cargo space in the normal course of
business. These have not been quantified & shown separately.
List of Fellow Associates*
City Properties Maintenance Company Bangalore Limited
DCL Holdings Private Limited
Inversiones Mirabel, S.A
Kingfisher Aviation Training Limited (formerly Kingfisher Training
Academy Limited)
Kingfisher Training and Aviation Services Limited (formerly Kingfisher
Airlines Limited)
Kingfisher Finvest India Limited (formerly Kingfisher Radio Limited)
Mangalore Chemicals & Fertilizer Limited
McDowell Holdings Limited
Mendocino Brewing Co. Inc, U.S.A
Pixray India Limited
Releta Brewing Company LLC
Rigby International Corp
Rubic Technologies Inc.
UB Electronic Instruments Limited
UB Engineering Limited
UB Infrastructure Projects Limited
UB International Trading Limited
UB Overseas Limited
UBHL(BVI) Limited
UBSN Limited
United Breweries International (UK) Limited
United Breweries of America Inc, Delaware
United Spirits Limited
WIE Engineering Limited (Under Liquidation)
* The above parties do not necessarily fall within the meaning of
"Related Parties" in terms of Accounting Standard -18.
7. Leases and Hire Purchase
a) The Company has entered into operating and finance lease agreements.
Disclosures required under AS 19 on "Leases" is as given below:
Operating leases
Operating lease arrangements comprise of leases of aircraft,
helicopters and spare engines. The salient features of such lease
agreements are as follows:
* Lease periods range up to twelve years and are usually
non-cancelable.
* Lease rentals are usually fixed over the term of the lease while some
arrangements are subject to adjustments linked to the Libor rates
movements.
* The Company also has agreements for maintenance and lease of stores
and spares for such aircrafts for which fixed and variable rentals are
paid. Variable rentals are paid on a pre determined rate payable on the
basis of actual flying hours / cycles. Such variable rentals are
subject to annual escalations as stipulated in the agreements.
However, the Company is eligible to claim reimbursement of maintenance
costs to the extent eligible under the agreements.
* The Company does not have an option to buy the aircraft or
helicopters and spare engines or to renew the leases.
* In case of default by the Company, in addition to repossession of the
aircraft, penalties are stipulated in the agreements.
* The Company is required to deposit a commitment fee and a security
deposit with the lessor or provide a letter of credit for such amounts.
In addition to the above, the Company has entered into agreements to
lease aircrafts / engines in respect of which the aircrafts / engines
are pending delivery / the lease was yet to commence as at March 31,
2010. The above table of minimum lease payments does not include
amounts that may become payable in respect of leases yet to commence as
at March 31, 2010.
Salient features of Finance Lease Agreement (Aircraft):
* Monthly aircraft lease rentals are paid in the form of fixed rentals.
* The Company is responsible for keeping the aircraft airworthy in all
respects and in good condition and insuring the same throughout the
lease period.
* The Company has an option to purchase the aircraft either during the
term of the lease on payment of the outstanding principal amount or at
the end of the lease term on payment of a nominal option price.
* In the event of default, the Lessee is responsible for payment of all
costs of the Owner including financing costs, and other associated
costs. Further, a right of repossession is available to the Owner /
Lessor.
b) In addition, the Company has entered into cancelable leasing
arrangements for office and residential premises which are renewable at
mutual consent. Lease rentals of Rs. 5,477.55 Lacs (Previous year - Rs.
5,465.43 Lacs) have been included under the head "Operating and Other
Expenses - Rent" under Schedule 18 in the Profit and Loss Account.
8. Segment disclosures
a) Geographical segments - Considering the internal reporting
framework, the Company has considered geographical segments as the
primary segments. Such segments consist of domestic air transportation
within India and international air transportation outside India.
b) Business segments
The Company operates in a single business segment, i.e. of providing
scheduled and unscheduled air transportation services. Accordingly, no
separate segment disclosures for business segments are required to be
given.
Deferred tax asset on unabsorbed depreciation and business losses has
been recognized on the basis of business plan prepared by the
management, which takes into account certain future receivables arising
out of contractual obligations. The management is of the opinion that
there is virtual certainty supported by convincing evidence that
sufficient future taxable income will be available against which the
deferred tax asset can be realized.
9. Provisions
In accordance with Accounting Standard 29 Provisions, Contingent
Liabilities and Contingent Assets, following is the movement in
provision towards cost for frequent flyer program.
10. Employee Benefits:
b) Contribution to defined contribution plans
Contribution to provident fund Rs. 602.13 Lacs (Previous year - Rs.
647.97 Lacs).
Contribution to social security schemes Rs. 198.23 Lacs (Previous year
- Rs. 157.79 Lacs).
11. The Company has initiated the process of obtaining confirmation
from suppliers regarding the registration under the MSME Act, 2006
("Micro Small and Medium Enterprises Development Act 2006"). The
suppliers are not registered wherever the confirmations are received
and in other cases, the Company is not aware of their registration
status and hence information relating to outstanding balance or
interest due is not disclosed as it is not determinable.
12. Accounts of certain creditors, debtors, loans & advances,
passenger service fees and user development charges payable are subject
to review / reconciliation / confirmation. Adjustments, if any will be
made on completion of such review / reconciliation / receipt of
confirmations.
13. The Company has incurred substantial losses and its net worth has
been eroded. However, having regard to improved passenger and cargo
load in recent months, improvement in economic sentiment and business
prospects, cost savings schemes being implemented, premature
termination of certain lease / purchase contracts, recently launched
international routes, route rationalization programs, request made to
banks to refix payment obligations and convert short term loans to long
term loans, request made to the Reserve Bank of India by banks to
provide a onetime dispensation from the prudential norms on income
recognition, asset classification and provisioning on such refixing /
conversion, group support, capital raising plans etc, the financial
statements have been prepared on the basis that the Company is a going
concern and that no adjustments are required to the carrying value of
assets and liabilities. The Company has availed the services of an
internationally renowned expert in aviation to assist it in the
turnaround operations.
14. The Companys Centralized Ticket Reservation System (CRS) does not
support capture of unearned revenue on a comprehensive basis.
Accordingly, such unearned revenue has been computed by the management
based on a statement of unflown revenue as at March 31, 2010 generated
by the service provider, which has been corroborated broadly by
multiplying the estimated aggregate number of unflown tickets as on
that date by the average estimated ticket value prevailing in each of
the months to which such unflown tickets relate to. In the opinion of
the management, the effect of mistakes observed in the said statement
is not material. Management is taking continuing steps to streamline
the process of determination. of unearned revenue.
15. The Companys Cargo Revenue Management (CRM) system is yet to
stabilize. Mistakes noticed have been corrected to the extent
identified. The Company is of the view that any unadjusted differences
will not be material. Management is taking steps to further streamline
the processes and stabilize the system.
16. Change in the method of accounting costs on major repairs and
maintenance of its engines:
During the year, the Company has adopted the exposure draft on
Accounting Standard - 10 (Revised) Tangible Fixed Assets which allows
such costs on major repairs and maintenance incurred to be amortized
over the incremental life of the asset. The Company has extended the
same treatment to costs and maintenance for engines pertaining to
aircrafts acquired on operating lease. Earlier, the Company used to
charge off the cost of such repairs and maintenance of its engines to
the Profit and Loss Account as and when incurred. Had the Company not
changed its method of accounting, the loss before and after tax for the
year would have been higher by Rs. 16,390.25 Lacs and Rs. 10,945.82
Lacs respectively. This revised accounting policy has been confirmed by
an independent expert and in the opinion of the management, this
accounting treatment has resulted in a fair depiction of the working
results and the state of the affairs ofthe Company.
17. The Company has not prepared consolidated financial statements
(CFS) as required by the AS 21, since the transactions of subsidiary
during the year/its assets and liabilities were not material.
18. Change in the method of accounting foreign exchange differences in
respect of long term monetary assets and liabilities
a) Till the previous year, the Company complied with the procedures
prescribed in Accounting Standard 11 in respect of foreign exchange
differences by recognizing the same as income or expense in the period
in which they arose. During the year, the Company has changed its
accounting policy with regard to the treatment of foreign exchange
differences in respect of long term monetary assets and liabilities by
following the provisions prescribed in notification (No. G.S.R.
225(E), dated March 31, 2009) issued by the Ministry of Corporate
Affairs. The Company has been legally advised that it is open to it to
exercise the option provided by the said notification, during the
current year. The underlying principle behind the issuance of the
aforesaid notification is to allow recognition of an appropriate charge
in financial statements for foreign exchange differences, by
eliminating excessive fluctuation differences that arise in respect of
long term monetary assets and liabilities.
b) Unrealized foreign exchange differences in respect of long term
monetary liabilities on account of depreciable assets as at March 31,
2010 recognized in the Profit and Loss Account during the year ended
March 31, 2009 has been adjusted in the cost of the relevant asset and
the opening debit balance in the profit and loss account of the current
year. Depreciation on the same has been prospectively adjusted over a
period of three years.
c) Unrealized foreign exchange differences in respect of long term
monetary assets and liabilities on account of non depreciable assets as
at March 31, 2010 and recognized in the Profit and Loss Account during
the year ended March 31, 2009 (net of amortization for the year 2008 -
2009) has been transferred to a Foreign Currency Monetary Items
Translation Difference Account by adjusting the same against the
opening debit balance in the profit and loss account of the current
year.
d) No adjustments have been made in respect of foreign exchange
differences in respect of long term monetary assets and liabilities as
at March 31, 2008 in the absence of ready data.
e) The amount amortized to the Profit and Loss Account of the current
year on account of Foreign Currency Monetary Items Translation
Differences is Rs. 2,798.28 Lacs.
f) The amount remaining to be amortized in the Foreign Currency
Monetary Items Translation Difference Account as at March 31, 2010 is
Rs. 2,798.27 Lacs Debit.
g) But for the said change, the loss for the year before and after tax
expense would have been more by Rs. 11.301.76 Lacs and Rs. 7,547.60
Lacs respectively.
19. Previous years figures have been regrouped / reclassified
wherever necessary to conform to the current years presentation.