Kingfisher Airlines Ltd. (KAIR), the Indian carrier struggling with a cash shortage, slumped the most in more than three years in Mumbai trading after tax authorities froze bank accounts forcing it to cancel flights.
The airline, controlled by billionaire Vijay Mallya, plunged as much as 20 percent, the biggest intraday decline since Nov. 5, 2008, to 21.35 rupees. It changed hands at 24.65 rupees as of 1:59 p.m. local time
Jet Airways (India) Ltd. (JETIN), the nation’s biggest airline, and discount carrier SpiceJet Ltd. both surged on speculation Bangalore-based Kingfisher may collapse following more than 10 quarters of losses caused by price wars and higher fuel costs. Kingfisher, which has cut about 15 percent of services, expects to resume full operations this week, it said on Feb. 18.
“It’s a dying thing,” said Priyadarshi Srivastava, vice president of IDBI Capital Market Services Ltd. “Investors still stuck with the stock have to accept the fact that they have made a wrong investment.”
Kingfisher expects to win new funding from banks and it is working to regain access to the frozen accounts, E.K. Bharat Bhushan, the head of the Directorate General of Civil Aviation, told reporters today in New Delhi after a meeting with airline Chief Executive Officer Sanjay Aggarwal. The regulator gave the carrier an extension until tomorrow to file a revised schedule.
The carrier is operating less than half of its 64 planes and it has pared services to about 175 flights a day, Bhushan said. There are no concerns about safety standards and the regulator isn’t considering canceling Kingfisher’s flight permit, he said.
The regulator is also checking how many pilots the carrier still has. As many as 50 have quit since Feb. 14, The Times of India newspaper reported today, without saying where it got the information. Prakash Mirpuri, a spokesman, didn’t answer two calls and a text message to his mobile phone. Kingfisher said yesterday that it has enough flight and cabin crew to operate its schedule.
“Sensational headlines more speculative than fact,” Mallya said on his Twitter feed, without identifying any specific articles. Mallya also controls liquor-maker United Spirits Ltd. (UNSP), a Formula One motor-racing team and owns Indian Premier League cricket team Royal Challengers Bangalore.
Kingfisher, which hasn’t paid salaries on time since December, expects to clear overdue wages by March 20, Bhushan said. The carrier’s flight cuts haven’t so far triggered a jump in ticket prices, he said.
United Breweries Holdings Ltd. (UB), Mallya’s holding company, fell as much as 12 percent. United Spirits, which makes McDowell’s No. 1 Whiskey, dropped as much as 5.4 percent. Jet Airways rose as much as 7.5 percent and SpiceJet jumped as much as 15 percent.
Kingfisher had jumped 27 percent this year through yesterday on speculation the government will help money-losing carriers. Regulatory changes under consideration include letting airlines import fuel to avoid state taxes and ending a bar on them selling stakes to foreign carriers.
The airline is seeking new investment after pledging its brand, office furniture and other assets against $1.3 billion of debts. Its loss in the quarter ended Dec. 31 widened to 4.44 billion rupees ($90 million) from 2.54 billion rupees. SpiceJet (SJET) and Jet Airways also lost money in the period. Indian airlines will probably lose $2.5 billion in the year ending March, according to CAPA - Centre for Aviation, an industry consultant.
Kingfisher has met with banks and requested additional working capital. It hasn’t asked the government for a bailout, it said yesterday. The airline said last month that it’s in talks with potential investors including SC Lowy Financial Services.
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