From good to bad times for Kingfisher

Last Updated 11 November 2011, 02:38 IST

Nearly 100 pilots have quit the airline, and with 30 flights, including international ones, cancelled on Thursday, the airline magnate-cum-liquor baron, often described as the ‘king of good times’, has plenty of reasons to worry. After the subsidiary Kingfisher Red, it is now bad times for Kingfisher Airlines.

The airline is having problems paying for aviation fuel supplied by the oil marketing companies.

The Indian Oil Corporation has put the carrier on cash-and-carry mode, implying that it has to pay for fuel on a daily basis, while Hindustan Petroleum and Bharat Petroleum are not supplying fuel as they have filed court cases against Kingfisher. The dues by the airline to the OMCs is to the tune of several hundred crores of rupees, sources said.
The consequences are near disastrous. Salaries are not being paid on time – which resulted in several of its cockpit and cabin crew from absenting on Thursday – to grounding of some of its fleet, including the turboprop aircraft, cancellation of about 120 flights over the last four days, including 30 on Thursday, and being slapped with a show-cause notice by the regulator Directorate General of Civil Aviation (DGCA).
The notice, issued on Wednesday, and returnable Friday, has asked Kingfisher to explain why the flights were being cancelled without its permission.

The regulator has asked the airline what steps it has taken so far to take care of the passengers booked in the flights which were cancelled – whether they were refunded their airfare, accommodated in alternative flights or provided alternative mode of transport.

“We have issued a notice to them under Rule 140(A) of Aircraft Rules,” DGCA chief E K Bharat Bhushan said.

Passengers stranded
As a consequence of Thursday’s flight cancellations, including 40 from Bangalore, hundreds of passengers were left in the lurch. There was chaos in several airports all over the country as Kingfisher passengers were told of their flights’ cancellation on reaching the airport. With their fares not refunded, the passengers had to book tickets with other airlines at exhorbitant rates to reach their destinations.

A direct spin-off of the cancellations was an increase in spot fares of other airlines, especially on the metro routes.

The carrier has claimed that the cancellations were because it was reconfiguring the aircraft by adding business class seats. The country's second largest airline in terms of passengers flown has already announced that the cancellations, both on its trunk as well as regional routes, will continue till November 19.

Reacting to the dismal state of affairs, Mallya said: "The decision to reschedule and cancel flights was to cut losses. We are only ensuring loss minimisation by flight rationalisation and enhanced revenue through reconfiguration."

The carrier, which recently announced it was exiting the low-cost service run by Kingfisher Red, has been mired in several problems. Oil marketing firms and at least two airport operators have put it on cash-and-carry mode even as it has talked of using a part of money parked with its aircraft lessors as safety deposits for maintenance to repay debt.
Adding to Kingfisher’s misery, airport operators in Delhi and Hyderabad are said to have threatened the airline that it would be put on a cash-and-carry system after dues touched an estimated Rs 90 crore.

There were also reports that the airline, which has been struggling to stay afloat for long, had defaulted in payments to international aircraft lessors and some of them have sought to impound the planes. However, the airline has denied such a move.
Kingfisher has suffered a loss of Rs 1,027 crore in 2010-11 and has a debt of around Rs 7,050 crore.

Company sources said the airline may use a part of money parked with its aircraft lessors as safety deposits for maintenance to repay debt. It may get about 60 per cent of the $200 million to repay debt.

Mallya has had problems with his airline business all through his business career. He began with UB Air which folded up within months and bought over low cost carrier Air Deccan which was later renamed Kingfisher Red.

Two months ago, Mallya decided that it was best to keep only a full-service airline and announced shutting down Kingfisher Red.

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(Published 10 November 2011, 14:23 IST)

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