Airline cancelled 50 flights on Friday and its stocks plummeted by 19%
As Kingfisher Airlines continues to sink deeper into financial crisis, there are indications that the government may try to persuade banks to accommodate India's second largest private carrier with funds and restructure its loans.
The company's stocks plummeted by 19 per cent to an all-time low, flashing warning signs that “good times” are set to get over.
On Friday, Civil Aviation Minister Vayalar Ravi said Kingfisher promoter Vijay Mallya had met him more than once and sought help. Mr. Ravi said he had spoken to Finance Minister Pranab Mukherjee about giving some bank assistance to the carrier, though the assistance might not be akin to the bailout and other concessions being given to the State-owned Air India.
Mr. Ravi said Kingfisher was closing down its flights, causing travellers inconvenience. The civil aviation sector, as a whole, was facing problems owing to high taxes on aviation fuel. The State governments should also help to maintain uniformity in taxes on aviation fuel.
Kingfisher has lost more than Rs.1,000 crore this financial year, and Rs.7,000 crore in bank loans has adversely impacted its performance. On an average, the carrier has grounded 40 flights daily over the past four days. On Friday too, it cancelled about 50 flights nationwide. Over the past six years, it has been in business, Kingfisher has not made any profit at any period, industry analysts point out. Despite all this, Mr. Mallya has ordered five double-decker A-380 aircraft.
Kingfisher has maintained that flights had to be cancelled because of the route rationalisation and its efforts at improving productivity, pressing ahead as it does with its plans to be a full-service carrier.
The carrier also owes money to the Delhi International Airport and the Airports Authority of India, which have threatened to impose cash-and-carry on the airlines. It means that the carrier will not get any credit and will have to pay daily for using the facilities at airports. Kingfisher owes Rs. 220 crore to the Airports Authority of India (AAI) alone, informed sources said.
State-owned oil companies such as Hindustan Petroleum, Bharat Petroleum and Indian Oil Corporation have also stopped credit to the airline for jet fuel supply. The carrier had had problems with the oil companies, but somehow managed to gain a breathing space.
Mr. Mallya is learnt to have spoken to the Directorate-General of Civil Aviation, which has issued a show cause notice to the carrier for suddenly cancelling flights. He has assured the regulator that the airline was working on a contingency plan to minimise inconvenience to passengers in the next few months. The company has also formally replied to the notice.
Passengers who had booked themselves on Kingfisher flights coughed up more as they flew other carriers at the last moment.
“Kingfisher Airlines (KFA) has reduced the frequency of some of its flights, which are predominantly over weekends, or on some routes where there has been a slow demand. For a limited period, these flights are either being cancelled or clubbed with other KFA flights in a well-controlled pre-determined manner,” the company said in a statement.
As the carrier had announced plans to focus on the full-service market, the statement said it started reconfiguration of its aircraft. “This exercise will require a few of our aircraft to be out of service for the next few weeks, requiring a temporary modification of the schedule of some of the flights. Once the reconfiguration is complete, these aircraft will be pressed back into service immediately,” the statement claimed.