Kingfisher Airlines may further curtail flights

Kingfisher Airlines, which is seeing turbulent times due to a fund crunch, may further curtail or club flights, as it struggles to source spares for its aircraft.

The airline, which has 20 aircraft, is operating 120 daily flights in its summer schedule, which began in March. Currently, the airline is using only 14-15 aircraft, as these are adequate to maintain its schedule.

According to an airline source, an Airbus A320 was grounded in Mumbai on Wednesday, leading to the cancellation of a few flights. Also, a few aircraft were scheduled to undergo routine maintenance that required replacement of parts. “We are trying our best to get spares. But if we do not get these on time, one or two more aircraft may be grounded,” he said.

Grounding of aircraft is not the airline’s only concern. It has not paid salaries to it employees for four months. “We were promised the salary for February by May-end. When we approached the management, we were told we would receive it by last weekend, but we haven’t yet got it. How can we believe the management, as it does not live up to assurances?” asked a senior commander. Protesting against the delay in salaries, 8-10 pilots have already stopped flying. An airline spokesperson did not respond to an email seeking comments.

In a report, Jasdeep Walia, a noted aviation analyst with Kotak Institutional Equities Research, stated during the second quarter of 2012-13, another round of capacity reduction by Kingfisher was likely.

“Normally, the second quarter is the weakest for airlines. This is when PLFs (passenger load factors) and, therefore, yields, are low and cash losses peak. In our opinion, further cash losses and lack of working capital support from banks can lead to more (smaller than before) capacity cuts by Kingfisher. As of April, Kingfisher accounted for approximately six per cent of the industry capacity,” Walia said.

For 2011-12, Kingfisher’s losses stood at Rs 2,328 crore. While it’s operating costs increased, passenger numbers and revenue declined, as the airline cut flights and withdrew its international schedule. Five wide-bodied Airbus A330s have been sent back for overhaul and engine and cabin reconfiguration. However, it is unclear whether the airline would induct these again or not.

Earlier this year, the International Air Transport Association (IATA) suspended Kingfisher Airlines from the billing settlement plan (BSP), a payment mechanism used by agents. IATA is yet to revoke the suspension, and this has affected sales for the airline. Currently, Kingfisher is selling its inventory on an Amadeus booking engine. According to industry sources, about 50-60 agents are using the system. Unlike IATA’s BSP system, which provides for 15-day settlements, Kingfisher had advised agents to remit proceeds after every two days.

“It is a stop-gap arrangement,” said a travel agent. There are a total of 3,200 IATA-registered travel agents in India, and about 550 in Mumbai. Till four months ago, 1,700-1,800 agents across India sold Kingfisher tickets, he said, adding, “Kingfisher is still attracting passengers. It is getting some business traffic, too, as sometimes, its tickets are even cheaper than those of low-cost airlines.”

Kingfisher’s loads picked up in the past two months, as it dropped fares. However, these are still the second-lowest among all domestic airlines.