Kingfisher has been battling for months with huge debts (around 130 billion rupees, or B83 billion at last count), massive operating losses, staff resignations and problems with the tax man.
Unlike recently collapsed Air Australia, however, Kingfisher is still flying, albeit at a reduced rate, and still battling to go on doing so.
On Monday The Times of London reported that help may be on the way from foreign investors. It cited the possibility that International Consolidated Airlines (ICA), the parent company of British Airways and Spain’s Iberia, might buy into Kingfisher.
The fly in the ointment is that the Indian Government would have to change the law to allow this.
Kingfisher has scrapped scores of flights over the past week, leaving passengers stranded and the airline’s owner, brewing magnate Vijay Mallya, known as the “King of Good Times,” battling to save the debt-laden company.
At least 20 flights were cancelled on Wednesday (February 22) by the airline, which owes millions of dollars to suppliers, lenders and staff.
“We are not going to bail out Kingfisher but we hope it can mobilise resources,” Civil Aviation Minister Ajit Singh said in New Delhi.
The airline submitted a fresh flight schedule to the Directorate General of Civil Aviation (DCGA) after the regulator on Tuesday ordered it to come up with a “realistic” plan.
Only 28 of Kingfisher’s fleet of 64 registered aircraft are in operation as many of its planes have been reclaimed by lessors or are awaiting spare parts.
“Kingfisher has submitted an updated schedule of flights. We are still reading and analysing it,” said DGCA Director-General Bharat Bhushan, who has ordered daily checks on the safety of the airline’s planes.
Mr Mallya welcomed the move to monitor the carrier’s safety.
“I am glad the DGCA wants to do special daily audits on us. We welcome the opportunity to prove our aircraft are entirely safe,” he wrote on Twitter.
The airline declined to comment on its new flight plan, but the Press Trust of India said the airline would operate around 170 flights daily, less than half of its intended schedule.
A consortium of over a dozen lenders, led by state-run State Bank of India (SBI), was reported to be considering providing funds to the struggling airline.
The banks “have to decide on the basis of the business plan of the company. If they are satisfied with the business plan, they can lend money,” Mr Singh said, adding the government would not interfere.
SBI’s shares plunged by nearly eight per cent on concerns about its existing loan exposure to Kingfisher and fears it would give
more. Shares of private IDBI Bank, another significant lender to Kingfisher, slid by nearly seven per cent.
Kingfisher’s shares dropped 6.53 per cent to 25.05 rupees while those of Mallya-controlled United Breweries (Holdings) Ltd slumped nearly 10 per cent to 84.85 rupees.
The Bangalore-based airline, India’s second-largest carrier until earlier this year when its cash woes deepened, has blamed its latest problems on officials freezing its bank accounts for not paying tax arrears.
The company posted a net loss of 4.44 billion rupees ($88 million) in the three months to December, compared with a loss of 2.54 billion rupees a year earlier.
Mallya has said that closing down the airline “is not an option”.
Kingfisher is one of India’s worst-hit airlines in an industry that is now plagued by high fuel prices, price wars and poor airport infrastructure.
The government is considering a proposal to allow foreign airlines to buy up to 49 per cent in local carriers, but the civil aviation minister said that would not resolve the airline’s troubles.
Even if the government cleared the plan quickly, “nobody is going to invest billions of rupees or dollars just within a day or two”, Mr Singh said.
In an analysis of what went wrong with Kingfisher, Indian website YourMoneySite blamed Kingfisher’s troubles on a combination of factors, including the airline’s huge size; being “blinded by its own glossy image”, which resulted in it refusing to operate on remote North Eastern Indian destinations; and its 2008 acquisition of Air Deccan, rebranded as Kingfisher Red, and aimed at the budget market.
Of the last, YourMoneySite says, “Running a full service carrier (FSC) along with a low-cost carrier (LCC) turned out to be messy for [both] airlines. Trying to manage an FSC and an LCC with the same management ended up making Kingfisher a “confused” airline.
“Costs were higher than LCCs, but the product was worse than the conventional FSCs. So, Mr Mallya’s airline lost both ways – it could neither cater well to the FSC nor the LCC customer. Hence, it rapidly lost market share.”
AFP