Kingfisher Air Scraps Overseas Flights as Mallya Seeks Funds
Kingfisher Airlines Ltd. (KAIR), the Indian carrier struggling with a cash shortage and losses, will end international flights next month and cut local routes as it seeks funds to revive operations.
Kingfisher will pare local flights by as much as 37 percent to between 110 and 125 a day with a 20-plane fleet, Chief Executive Officer Sanjay Aggarwal told reporters in New Delhi yesterday after submitting a new plan to India’s aviation regulator. The airline will stop services to eight overseas destinations by April 10 after bookings were hit by a suspension from an international billing facility, he said.
The carrier may lose its license as billionaire Chairman Vijay Mallya struggles to implement turnaround plans, according to Aviation Minister Ajit Singh. The new proposal is at least the second reduction in services in less than a month for the Bangalore-based carrier, which had 340 flights a day in October.
“The problem is in the last two to three months, he’s given so many plans and he’s not adhered to any of them,” Singh told reporters in New Delhi yesterday. The government won’t let any carrier fly if safety standards are endangered, which usually includes financial viability, he said.
Kingfisher rose 1.1 percent to 19.20 rupees as of 9:51 a.m. in Mumbai, after gaining as much as 4.2 percent. Jet Airways (India) Ltd. (JETIN), the nation’s biggest airline, fell as much as 1.9 percent, while SpiceJet Ltd. (SJET) dropped as much as 2.4 percent.
Kingfisher got access to some bank accounts that were earlier blocked by tax authorities because of late payments, Mallya said yesterday. The frozen accounts had disrupted payments to suppliers, including the International Air Transport Association, contributing to the carrier cutting flights and delaying salaries to employees.
Closure may happen “unless you find a buyer or someone who pumps serious money into the business,” said Shumukh Ghosh, a Mumbai-based analyst at Naman Securities & Finance Pvt. “Still, I don’t feel the regulator will shut the airline down just yet. In India, we don’t want to take hard decisions.”
Cancellation of the license was not discussed in the meeting with the regulator, Aggarwal said. “What we have presented is a plan that is sustainable and can be continued without further hiccups.”
Some of the potential investments in Kingfisher depend on a change in foreign ownership rules, Aggarwal said. The airline is also in talks with local investors for funds, he said, without giving details.
The carrier has been seeking new funds or loans since at least November when it shuttered low-cost services and deferred plane deliveries as part of a turnaround plan. The company has posted more than 10 straight quarterly losses as it contended with high jetfuel expenses and a price war.
Finance Minister Pranab Mukherjee last week proposed allowing airlines to borrow as much as $1 billion industrywide from overseas for working-capital requirements. Mukherjee also earmarked 40 billion rupees in the federal budget to bail out Air India Ltd., the state-owned carrier.
The government doesn’t want to ground Kingfisher because of concerns about employees, passengers and fares, Minister Singh said.
Kingfisher also had its five-star service rating suspended by SkyTrax Research following cuts in its international network. The carrier said March 14 it was paring overseas operations that are “bleeding heavily.”
Suspension from the IATA system used by travel agents because of overdue fees affected bookings. Airline executives have gone to Geneva to work to regain access as soon as possible, Mallya said.
Kingfisher lost domestic market share every month from October through February, according to data available with the regulator, as it cut flights and as service disruptions deterred passengers from booking tickets. The carrier had a market share of 9.7 percent last month from 11.3 percent in January.
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