Airbus SAS canceled Kingfisher Airlines Ltd. (KAIR)’s order for superjumbos, reducing chances for resumption of services by the grounded Indian carrier.
The orders for five A380s and another five A350-800 planes were scrapped by Airbus, John Leahy, chief operating officer of the Toulouse, France-based planemaker, said yesterday in an interview. Prakash Mirpuri, a spokesman at the carrier, said Kingfisher is trying to restart operations and the orders were canceled as it has no plans for long-haul services.
The cancellations add to the woes of Kingfisher chairman Vijay Mallya after an Indian court last month voided Diageo Plc (DGE)’s acquisition of a stake in the liquor tycoon’s United Spirits Ltd. (UNSP) Kingfisher, which lost its airline license last year, said it doesn’t have any source of revenue and is in talks with an investor for funds.
“It is very difficult to restart, given the extreme circumstances that they are in, you have to pay a lot of debt, pay employees and the whole process requires massive funding,” said Kapil Kaul, chief executive officer for South Asia, CAPA Center for Aviation in New Delhi. “It doesn’t seem to be a feasible case.”
Kingfisher, the only Indian carrier to order A380s, has grounded planes since October 2012. The airline lost its operating license in January last year after failing to convince authorities it has enough funds to restart flights.
The airline defaulted on payments to lessors, creditors and airports as losses widened amid rising fuel costs and competition. Mirpuri said in an e-mail last night the airline continues its efforts to recapitalize and restart services.
“There is absolutely no source of revenue/income for the company as a result of which the company does not have the means and is not in a position to pay employees dues,” Mirpuri said in a separate e-mailed statement yesterday. “We are doing our best to revive the airline.”
Kingfisher had total debt of 91.4 billion rupees ($1.5 billion) as of Sept. 30, according to data compiled by Bloomberg.
Shares of Kingfisher fell 4.4 percent to 4.30 rupees at the close in Mumbai. They fell 71 percent last year, compared with the 9 percent gain in the benchmark S&P BSE Sensex.
Kingfisher has yet to take delivery of 24 A320 single aisle planes and 15 A330-200 aircraft as of the end of November, according to the Airbus website.
The Indian carrier, which once had as many as 68 aircraft in its fleet, now has just one active plane, an Airbus A319 corporate jet, according to aircraft tracking website planespotters.net and regulator data.
The cancellation of the A380 superjumbo by Kingfisher was the second suffered by Airbus last year as the Indian airline followed Deutsche Lufthansa AG (LHA) in dropping commitments. The aircraft maker has an order backlog of 5,559 jets at the end of 2013, and its net order intake was 1,503 after cancellations, it said yesterday.
Indian carriers are struggling with high levels of debt and the region’s most expensive fuel tariffs. Jet Airways (JETIN) (India) Ltd., the country’s biggest publicly traded airline, posted a record quarterly loss in the three months ended September as demand declined and fuel costs increased.
India’s cabinet in October approved a proposal by Abu Dhabi-based Etihad Airways to buy a 24 percent stake in Jet, paving the way for the first share sale by a carrier in the Asian nation to a foreign airline since restrictions were eased.
Kingfisher reiterated yesterday that it is in discussions with an investor for funds, without providing details.
Diageo, the maker of Johnnie Walker whisky and Smirnoff vodka, agreed last year to buy a controlling stake in Mallya’s United Spirits. United Breweries Holdings Ltd. (UB) yesterday filed an appeal to India’s top court against a lower court’s order on the stake sale.
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