But experts say this may not be enough to save the cash-squeezed company. Its shares surged last week on hopes that the Indian Cabinet could soon agree to give foreign carriers the green light to invest – a move that could throw a lifeline to the airline controlled by billionaire liquor baron Vijay Mallya.
But Kingfisher, which has never made a profit since it was created in 2005, is in urgent need of as much as US$600 million to stay in business, said the Centre for Asia Pacific Aviation (CAPA), a consultancy firm.
Kingfisher, which has shut down its overseas operations and slashed domestic flights, desperately needs the cash infusion to pay the millions of dollars it owes to suppliers, lenders and other creditors.
Mallya is rooting for the new foreign direct investment (FDI) policy which could be Kingfisher’s last chance of survival.
But the policy move is “like the government calling his bluff”, said Sonam Udasi, research head with IDBI Capital.
Udasi said foreign investors may show interest in some Indian airlines in hopes they will start making money at some point, but better-managed carriers such as the low-cost SpiceJet would likely be more attractive.
CAPA’s South Asia chief executive Kapil Kaul added that investor interest in India’s embattled aviation industry was “limited” due to high fuel taxes and poor airline balance sheets. (Kingfisher last week received government approval to import aviation fuel itself, which will lower its costs somewhat.)
In February, India logged the second-best air traffic growth in the world, at 12.3 per cent, according to global airline body IATA.
But despite this, five of India’s six main airlines are losing money because of high fuel costs, fierce competition, price wars and an economic slowdown.
Just one Indian airline, the budget carrier IndiGo, is profitable.
This month, Kingfisher started to pay staff salaries that had been unpaid for months, after its bank accounts were unfrozen, but it still owes more taxes and also has to pay airports and clear fuel bills.
The reputation of the airline is in tatters after it more than halved its daily flights to about 120 operated by 20 aircraft, down from a peak of over 250 flights with 64 planes.
Mallya, who also runs a profitable brewery business, has confirmed “interest” from prospective buyers to invest in Kingfisher, which could help reduce its US$1.5 billion net debt.
Foreign airlines are currently barred from holding stakes in Indian airlines. Meanwhile, in a move not without its irony, GR Gopinath, who introduced the no-frills airline concept in India by starting Air Deccan, which he later sold to Kingfisher, now plans to launch
another scheduled carrier.
India’s Business Today quoted Gopinath as saying, “I have got the clearance,” though he declined to go into detail.
When Mallya’s UB Group bought a 26 per cent stake in Deccan in 2007 (he eventually completed a takeover after buying more shares), the deal included a five-year non-compete clause, barring Gopinath from launching a new airline to compete with Kingfisher/Deccan.
That clause expires in a couple of months.