With little cash and over half its fleet grounded, Kingfisher Airlines has run into yet another crisis that includes reduction of flights and attachment of its bank accounts by the income tax authorities.
The airline withdrew several of its flights on Saturday. While Kingfisher issued a late night statement to say that only 32 of its 240 flights had been withdrawn, travel agents said the number would be much more.
Kingfisher said the flight disruptions since yesterday “will continue for four days due to unexpected events including bird strikes which rendered aircraft out of service”. It also said the airline would operate the full schedule on its booking system within the next four days.
But random checks on the Kingfisher website for next week’s flights between Delhi-Kolkata and Mumbai-Singapore returned the result “no flights found.”
Kingfisher confirmed that its bank accounts were attached by the tax authorities, but added: “This has happened in the past not just to us but also to Air India. We have resolved issues before and will do so again”.
There was also a growing buzz that the airline had shut down flights to and from many stations and many flights from Kolkata had been suspended and taken off ticketing sites.
The airline, however, said it had neither shut any station nor did it have any intention of doing so. But a travel agent said he had been making frantic calls to the airline, which had not been giving updates on how many flights have been withdrawn and for how long.
“By curtailing operations, Kingfisher will be able to burn less money. But this is temporary and gradually the airline will try to bring its fleet back,” said Kapil Kaul of Centre for Asia Pacific Aviation.
Lenders have declared Kingfisher Airlines a substandard account and its entry into a global airline alliance — Oneworld — has been stalled for now because of its financial troubles. Also, some of the company’s lessors have threatened to repossess its planes and tax authorities have warned they may freeze its accounts.
Kingfisher has been directed by its lenders to reverse the nearly Rs 100-crore guarantee commission it paid to the promoter and UB Holdings, as a pre-condition to consider the second round of bailout. The airline had entered into an agreement with Chairman Vijay Mallya and his holding company, UB Holdings, whereby it paid them Rs 49.48 crore and Rs 58 crore, respectively, against the guarantees they provided for Rs 7,000-crore worth bank loans.
The airline said it had a “good meeting” with banks which have accepted, in principle, the viability study prepared by SBI Capital markets and independent consultants. Its request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals.
Kingfisher has a fleet of 64 planes, which include Airbus A320s, ATRs and Airbus A330s. In an audit two months ago, the Directorate General of Civil Aviation had said that nearly 20 planes were grounded. Sources said that airline was currently operating only 22 planes and the rest had been grounded. The figure could rise further as several aircraft engines were due for overhaul and because of a cash crunch and issues with vendors, the airline might not be able to carry out the required overhaul in time, a source said.
In the third quarter of this financial year, the airline reported an increase of 75 per cent in its loss to Rs 444 crore, compared to that in the same quarter last financial year.
Three months back, Mallya had declared that the airline would not be shut and it was unfair to write its epitaph. The airline management had pinned hopes on support from aircraft lessors and lenders for halving its Rs 6000 crore debt and fresh funds. But things have not gone right. With funds drying up, the airline has been unable to clear dues or make tax payments on time.
In January, Kingfisher’s market share fell to 11.3 per cent, from 16.7 per cent in October 2011. Only GoAir had a smaller market share, at 5.8 per cent.
|We have not shut any stations, says Kingfisher
1. With great respect to our friends in the media, it is not desirable to magnify or sensationalise any issue pertaining to Kingfisher Airlines.
2. We would like to categorically state that we have not shut any stations nor do we have any intention of doing so.
3. Admittedly there have been flight disruptions since yesterday which will continue for four days due to unexpected events including bird strikes which rendered aircraft out of service. We, therefore could only operate 208 daily flights.
4. The speculative queries that we are reducing our operating schedule from 240 flights a day are ill-founded as we will operate the full schedule on our booking system within the next 4 days.
5. There have been queries on whether we have been selling low fares. We cannot possibly understand the logic or motivation behind such a question as we, ourselves, announced that we intend focussing on the full service segment where our yields are higher. This low fare question was initially attributed to Air India and it seems to be Kingfisher's turn now to respond to questions from vested interests.
6. We confirm that our Bank accounts were attached by the tax authorities. However, this has happened in the past not just to us but also to Air India. We have resolved issues before and will do so again.
7. We have had a good meeting with our consortium of Banks who have accepted, in principle, the viability study prepared by SBI Capital markets and independent consultants. Our request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals.
8. We would appreciate it if media would present a balanced and factual picture rather than adopt a wholly negative posture against Kingfisher which, regrettably has been the case.