Wings Magazine

Indian government may help struggling Kingfisher Airlines

Nov. 14, 2011, New Delhi, India - India's prime minister said his government will look
into ways of helping cash-strapped Kingfisher Airlines Ltd., which cancelled hundreds of domestic flights last week.

November 14, 2011  By Carey Fredericks

The airline, partly owned by brewery tycoon Vijay Mallya, said it was not seeking a government bailout, and the aviation minister also said nothing of the sort was pending.

But Mallya this week questioned India's high landing tariffs and fuel taxes in a market already struggling from rising fuel costs, crushing price wars and an 11 per cent drop in the value of the Indian rupee over the past year.

Prime Minister Manmohan Singh suggested late Saturday during a flight from the Maldives that he would look into the issue, but he did not say what actions might be considered, Indian media reported.

Kingfisher's sudden cancellation of 210 flights over the past week comes after years of lobbying by the airline industry for lower tariffs and landing fees to help the Indian carriers compete with increased international competition.


Kingfisher, India's second-largest carrier, has yet to post a profit since beginning operations in 2005 amid widespread market optimism fueled by the growing economy and rising middle class.

Several other low-cost competitors have since launched within India, and today one in 200 Indians flies once a year — a figure expected to grow exponentially as aviation experts note the domestic market is posting the highest growth rate for aviation globally.

On Sunday, Kingfisher's creditor banks — including SBI, ICICI Bank, IDBI Bank and Punjab National Bank — were discussing a possible restructuring of the airline's debts totalling more than $1.4 billion.

Meanwhile, airline CEO Sanjay Aggarwal said the carrier would stop running unprofitable flights after posting $228 million in losses last year.

Last week's cancelled flights, he said, were part of a wider cost-saving plan to reduce daily flights from 340 to 300, and that new schedules would be posted online soon.

The company in September shut down its loss-making budget carrier, and Aggarwal said three planes would now be taken out of service. The Economic Times reported Friday that leasing companies wanted Kingfisher to return their aircraft after the company fell
behind on payments.

Kingfisher's problems have worsened since three oil companies stopped giving it jet fuel on credit and asked the airline to make daily payments. It has also piled up unpaid fees to airport operators and other agencies, and returned 14 leased A320 jets.

Its problems, however, are not unique within India.

The country's largest airline, Jet Airways Ltd., on Friday posted a loss of $158 million for the quarter ending September after reporting a profit for the same period last year. The downturn, it said, was largely due to high fuel costs and currency devaluation.

And the once-proud national carrier, Air India Ltd., has been losing about a billion dollars a year as it struggles with the legacy of a poorly executed 2007 merger, debt costs, a swollen staff and a toxic gulf between management and powerful unions.

The government last year extended hundreds of millions in bailout funds to help state-run Air India weather the global economic slowdown and compete with international rivals. It has since been beset by pilot strikes demanding more pay.


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