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Owner downplays Kingfisher Airlines’ problems

Nov. 15, 2011, New Delhi, India - The owner of India's beleaguered Kingfisher Airlines sought to downplay its problems even as the company posted a second quarter loss Tuesday of 4.69 billion rupees ($93 million) amid cancellations of hundreds of flights.


November 15, 2011
By Carey Fredericks

The airlines quarterly sales of 15.3 billion rupees ($303 million) were up from 13.8 billion rupees ($274 million) in the same period of 2010.

Kingfisher's net loss in the quarter ended Sept. 30 last year was 2.31 billion rupees ($46 million).

Vijay Mallya, the brewery tycoon who is part-owner of the airline, told reporters that Kingfisher hadn't asked the government or its banks for a bailout package or failed to pay its fuel suppliers. He also defended the company's decision to cut flights on loss-making routes.

"To write the epitaph of Kingfisher Airlines constantly is not fair," he said.

Mallya blamed India's high landing tariffs and fuel taxes in a market already struggling under the burden of high fuel costs, price wars and an 11 per cent drop in the value of the Indian rupee over
the past year.

Mallya said fuel prices were at near-record highs and airlines have struggled with the additional burden of steep sales taxes levied by state governments on aviation fuel.

"The state governments are enjoying windfall profits directly at the cost of the aviation industry," he said, adding that Kingfisher had been forced to apply for permission to directly import fuel to avoid the taxes.

"That seems to be the last resort in order to get fuel costs down to where they should be."

Over the weekend, Prime Minister Manmohan Singh suggested that he would look into Kingfisher's problems but he did not say what actions might be considered.

Mallya said he was grateful for the prime minister's comments, although he hadn't asked the government or Kingfisher's banks for a restructuring or bailout package.

Mallya said the airline was also in compliance with payment agreements with the oil companies that sell it fuel.

"We get supplies of fuel every day and our airplanes fly."

News reports have said that its creditor banks – including SBI, ICICI Bank, IDBI Bank and Punjab National Bank – have been discussing a possible restructuring of the airline's debts of more than $1.4 billion.

Mallya said the cancellations of flights was a "commercially prudent decision" because the routes in question were incurring huge losses.

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

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

Kingfisher is India's second-largest carrier and has been in the red since beginning operations in 2005.