Cash-strapped tycoon Vijay Mallya on Wednesday announced exiting low-cost airline Kingfisher Red and raising about Rs 2,000 crore
($400 million) through a rights issue to improve the beleaguered company's cashflow
"Yes, we are doing away with Kingfisher Red. We don't intend to compete in the low-cost segment. But all is not gloom and doom," Mallya told reporters on the margins of the Kingfisher Airlines Ltd annual general meeting (AGM) in Bangalore.Kingfisher Q1 loss at Rs 264 crore
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Asserting that the margins of Kingfisher Class were better as its yields were higher than the low-cost operations, Mallya earlier told the shareholders that he was exiting Kingfisher Red as it did not make sense to compete in the budget segment.
"We believe there are more than enough guests who prefer to travel the full-service Kingfisher Class
. And that shows through in our own performance where load factors in Kingfisher Class are more than in Kingfisher Red," Mallya observed.
The shareholders unanimously approved the company's rights issue to raise Rs 2,000 crore.
Though a general depository receipts
(GDR) issue was approved in the past, the company could not float it due to unfavourable external factors such as high crude oil prices.
Informing the shareholders on the latest cost-cutting and revenue generating measures, the 'King of good times' said as there were always opportunities that showed up, he was examining all options available, including the rights issue that was approved at the AGM.
"Timing is everything. We'll obviously take all factors into consideration before we launch the rights issue. You must also appreciate the factor that the pricing of the issue will also be a determining factor in how attractive it is. Sometimes, in a bad environment, a lower price it becomes an attractive investment," Mallya pointed out.
The company has already started reconfiguration of its aircraft and the exercise will be over in the next few months.