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Kingfisher battles to end freefall

Embattled Indian airline Kingfisher hoped this week to convince investors, creditors and passengers that it can pull out of freefall and fly right.

Friday 23 March 2012, 09:28AM


Indian business website Livemint.com predicted that the recovery will entail further cutting of international operations, the dumping of all loss-making routes, renegotiation of high-cost aircraft leases, tapping foreign loans for working capital, and getting back its US$40 million (B1.2 billion) deposit from the International Air Transport Association (Iata).


The airline held a difficult meeting late last week with pilots who are on strike after not being paid since December.
It is also being given a rough ride by India’s Director General of Civil Aviation (DGCA), EK Bharat Bhushan, who has issued a show-cause notice to the airline demanding to know why it should be allowed to continue operations.


The DGCA’s concern is that Kingfisher’s apparent lack of funds could affect safety. If Kingfisher’s answers are found to be unconvincing, Bhushan could initiate tough measures against the airline.


LiveMint quoted Mr Bhushan as saying at the weekend that he was free to meet Kingfisher Airlines executives to discuss a recovery plan, and that he was monitoring the airline’s operations.


Another battle the airline faces is a very real possibility of court action by the tax authorities, which have accused it of collecting taxes from both staff and passengers, but failing to pay them on to the government.


The Times of India quoted Central Board of Excise and Customs Chairman S K Goel as saying, “They [Kingfisher] have to face the court... Evasion has already taken place...They can even be jailed.”


Beset from all sides, and with falling numbers of passengers willing to travel on the airline, Kingfisher
seems to be pinning its hopes on the big plan to be announced this week.


A key element in plan is recovering the US$40 million deposit kept with Iata, which has suspended Kingfisher Airlines for the second time in two months from the Iata Clearing House (ICH) system because of its failure for make payments.


Airlines use the ICH system to settle payments for interline agreements. Every Iata member is required to keep a deposit with the body for such settlements.


The airline’s net loss widened sharply to 4.44 billion rupees ($88 million) in the three months to December from a loss of 2.54 billion rupees a year earlier, while its debt totals at least $1.3 billion.


India’s airline industry – once a symbol of the country’s economic progress – is now plagued by high fuel prices, fierce competition, price wars and inadequate airport infrastructure, with Kingfisher one of the worst-hit firms.


The airline has said “positive and immediate action is being taken on all fronts to cut costs”.

Kingfisher’s market share has slid to fifth position at 11.3 per cent, from second earlier, according to data on the civil aviation regulator’s website.


The carrier has never turned a profit since its launch in 2005 and owes millions of dollars to suppliers, lenders and staff.

 

 

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