Kingfisher near collapse
More than 100 flights cancelled, dozens of pilots quit
India’s debt-crippled Kingfisher Airlines Ltd stood on the brink of collapse after nearly a week of flight cancellations and the resignation of dozens of its pilots.
NEW DELHI: India’s debt-crippled Kingfisher Airlines Ltd stood on the brink of collapse yesterday after nearly a week of flight cancellations and the resignation of dozens of its pilots.
Vijay Mallya, the flamboyant liquor baron who owns a majority stake in Kingfisher, said he was determined to keep the airline flying and blamed a cash crunch on the tax authorities which have frozen its bank accounts over outstanding dues.
“I am absolutely committed to keeping the airline going unless some government agency wishes to ground it,” Mallya told reporters. “The point is our banks accounts have been frozen by income tax authorities very suddenly and that has crippled us.”
There are no provisions for companies to declare themselves legally bankrupt in India. Analysts said Kingfisher could simply shut down overnight if it fails to secure fresh equity that would shore up the sagging confidence of its creditors.
“If they don’t get fresh equity, obviously they are doomed. They don’t have the money for maintenance, for employee salaries, for anything,” Sharan Lillaney, an aviation analyst at Angel Broking, said.
Kingfisher shares plunged nearly 20% yesterday ahead of a meeting between the airline’s top executives and India’s aviation regulator, which demanded an explanation for the cancellation of more than 100 flights over the past four days.
Of the 64 planes in its fleet, Kingfisher is now using just 28, disrupting the travel plans of thousands of passengers across the country.
However, the company’s shares recovered to end slightly higher on hopes that there was still hope after the regulator said Kingfisher had assured it that bank funding was on its way.
The regulator gave Kingfisher Airlines 24 hours to come up with a revised schedule for the aircraft still in operation.
With one of the world’s most expensive yachts and a cricket and Formula One team, Kingfisher Airlines’ billionaire chairman is known as the “King of the Good Times” for a jetset lifestyle that has shadowed India’s own rise as an economic power.
The 56-year-old Mallya is also chairman of United Breweries (Holdings), a conglomerate with interests as diverse as aviation, breweries, biotechnology and real estate. The group has annual sales of more than Us$4bil.
Five out of six major carriers are losing money, and analysts estimate that the industry overall is on course to lose up to Us$3bil for the financial year ending next month.
Kingfisher, which until this year was India’s second-largest airline, has not turned a profit since it was founded in 2005 and is carrying a debt burden of Us$1.3bil.
Its revenue has been in decline since the end of last year and now, strapped for cash, staff are not being paid and tax bills remain outstanding adding a further Us$477mil to its debt, according to Kotak Institutional Equities.
Shares in Kingfisher have dropped 59.7% since the start of last year, shrinking its market value to Us$269mil. Its domestic market has almost halved in recent months from about 20%.