“I’m quite worried about the fact that the pilots haven’t been paid”
Anurag Chadha had one thing to say after flight disruptions at billionaire Vijay Mallya’s Kingfisher Airlines curtailed his holiday plans. “I will never fly Kingfisher again,” he groused after arriving on March 8 at Mumbai airport on a Jet Airways (India) flight from Kolkata. Chadha, who works for a management consulting firm in Mumbai, had been scheduled to fly back a day earlier on Kingfisher but ended up canceling his flight after repeated delays and spent a night in a hotel at his own expense.
Since October, Bangalore-based Kingfisher has fallen to No. 5 in the Indian market from second place. (Jet is No. 1.) The cash-strapped carrier’s flight cancellations and very public struggles to pay fuel bills and crew wages have deterred travelers. The airline has lost money for at least 10 consecutive quarters because of rising fuel costs and competition from cut-rate fares offered by state-owned rival Air India, which itself is scrambling to stay aloft. Kingfisher reported on March 20 that it is flying only 20 of its 47 jets while operating 110 to 125 flights daily—down from 340 flights a day in October.
Mallya, who amassed his fortune brewing India’s most popular beer, met with pilots on March 15 in a bid to keep them from quitting because of missed paychecks. Yet no long-term workout appears near for Kingfisher, whose lenders just last year converted 13 billion rupees ($257 million) of debt into preferred shares and granted as much as 12.1 billion rupees in new loans.
The uncertainty doesn’t sit well with fliers. “I’m quite worried about the fact that the pilots haven’t been paid,” says Eva Santi Sharma, a therapist and painter, as she waits in Mumbai for a Kingfisher flight to Goa that had been delayed from the previous day. “How can they work without pay?”
The airline says it plans to pay the pilots as soon as possible. The tax man is also waiting. Indian tax authorities had frozen Kingfisher accounts, disrupting payments to suppliers. (On March 20, Mallya said some accounts had been unblocked.) Earlier this month the carrier’s access to the International Air Transport Association’s computer network, used by travel agents to make reservations, was suspended after the IATA said the Indian carrier failed to settle payments on time and didn’t pay required cash deposits. That’s further dampened ticket sales. Mallya said Kingfisher executives have been sent to Geneva to work with the IATA to regain access to the accounts.
The carrier has been seeking new funds and investment since at least November, when it cut 12 percent of flights, deferred deliveries of new aircraft, and shut a low-fare unit in a bid to end losses. By contrast, Air India is getting a 40-billion-rupee government bailout. The state-owned airline has already received 32 billion rupees in aid since April 2009.
New Dehli won’t bail out Kingfisher—nor will it ask banks to lend money to the carrier, Civil Aviation Minister Ajit Singh said at an air show in Hyderabad recently. However, Singh said the government won’t force the carrier into bankruptcy. V.P. Agrawal, chairman of the Airports Authority of India, the state-run operator that is owed 2.6 billion rupees by Kingfisher, says his agency can’t act against the carrier because of the effect it would have on the weakened industry. India’s airlines may wind up losing $2.5 billion in the year ending March 31, according to CAPA Centre for Aviation, an industry consultant. Kingfisher’s disruptions are “a matter of grave concern,” says E.K. Bharat Bhushan, head of the industry’s regulator, the Directorate General of Civil Aviation. “The situation cannot be prolonged.”
Despite the turmoil, a shrinking Kingfisher filled 80.4 percent of its seats in February, reversing a big decline the previous month. In a sign of just how unsettled business remains across India’s commercial airline business, Kingfisher actually filled a higher percentage of its available passenger seats last month than did rivals Air India, Jet Airways, and SpiceJet.