New Delhi: Beleaguered Kingfisher Airlines on Friday sought government help for a bailout on a day when its shares crashed to a record low amid continuing debt fears, as it cancelled more flights for the fifth straight day with 40 flights being withdrawn. Agencies
With his cash-strapped airline hitting a air pocket, its owner Vijay Mallya made a urgent request to Finance Minister Pranab Mukherjee and Civil Aviation Minister Vayalar Ravi to
help his carrier in infusion of funds through banks at low interest rates, besides other concessions in line with what Air India was getting, sources said.
The stocks of the airline plunged to an all-time low to 19.1 per cent in early trading on the Bombay Stock Exchange to a record low before recovering to 9.45 per cent.
Hundreds of passengers were inconvenienced after the private airline went on a cancellation spree amid reports of travel agents not taking bookings. With Friday’s cancellation of 40 flights, at least 160 scheduled flights were not operated since Monday.
Observing that Kingfisher was "facing a problem", Ravi said Mallya had met him and explained the problem.
"I will also talk to the Finance Minister ... (so that) some assistance from the lead banks is granted. ... Closing down of flights affects the travelling public. Whether it is private or public sector is immaterial. It is an Indian carrier. He could not get financial assistance,
so he talked to me," Ravi told reporters here.
However, there was no official word immediately on whether any step was being taken on Mallya's request, which he made earlier this week.
Ravi's comments drew sharp criticism from BJP leader and former Finance Minister Yashwant Sinha, who said there was "no case for a government bailout for Kingfisher. We cannot support such a step."
Congress spokesperson Manish Tewari said it remains to be seen whether in a market economy the government will walk the extra mile to bail out a private company or should allow the shake-out to take place and the fittest to survive".
Replying to questions on the Kingfisher issue, Tewari said, "Ask the Civil Aviation Minister because there is a fundamental issue involved here. But in what context, what
circumstances (is government bailout being thought of), he can better explain."
Thousands of passengers across the country cancelled Kingfisher flight tickets to travel by other airlines, though after paying 20-40 per cent higher at the last moment.
The airline, which had earlier said it would restore its flights after October 19, has now indicated that it would take a few more weeks to normalise the flight schedule, that would
go into the peak winter season air traffic.
Apart from taking aircraft off flights to reconfigure and install business class seats in them, airline CEO Sanjay Agarwal said, "We decided to reduce frequency in some of the routes where we had multiple flights like Delhi-Mumbai or low passenger load like Nanded-Mysore. This is part of route rationalisation to improve profitability and revenue productivity of the flights".
Asked whether they had responded to the show-cause notice issued by the Directorate General of Civil Aviation (DGCA), Agarwal said, "We are in close touch with them. We are
explaining to them that these cancellations are temporary in nature. We are keeping them informed."
DGCA has issued the notice under Rule 140(A) of the Aircraft Rules, 1937, asking Kingfisher why it had not taken the regulator's prior approval to curtail its flight schedules as required by this rule. It has also sought to know whether the airline had taken any step to facilitate the passengers inconvenienced by the cancellations.
Meanwhile, oil PSUs -- HPCL, IOC and BPCL -- have denied extending Kingfisher the credit line and asked it to pay for lifting jet fuel on a daily basis.
The airline has suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7057.08 crore. To questions on alleged exodus of pilots and cabin crew, Agarwal said, "There is a process of natural attrition. Pilots and other staff come and go. If you put the number of pilots who have left in over 7-8 months, it could be 100. This has not happened all of a sudden as is being projected. Not a single Kingfisher flight has been cancelled due to shortage of crew as is being reported. We have over 650 pilots on our rolls now."
Industry sources said the lessors of Kingfisher's leased turboprop ATR aircraft fleet have put the airline on notice and want urgent payments for the lease.
The cash-strapped carrier also has unpaid dues to the operators of airports and other agencies, which have also been putting pressure on it to expedite payment.
Meanwhile, Kingfisher's shares slumped by over 19 per cent to an all-time low on the bourses, before recovering some ground.
Kingfisher assures DGCA
Directorate General of Civil Aviation said Kingfisher Airlines have assured it that at any given point of time not more than three of their aircraft would be out of use and maintained the government is keeping an eye on whether airlines were using their slots.
Pointing out that Kingfisher Airlines has sent a reply explaining why its aircraft were not flying, DGCA head Bharat Bhushan told reporters that the airline has given reconfiguration of the planes as the reason.
"As part of the plans of reconfiguration of their aircraft, they are planning to reconfigure about 30 aircraft by putting business class seats," Bhushan told reporters.
"They have promised that at any given point of time not more than three aircraft would be out of use and they expect this whole process to be completed in four months time," he
The government has sought an explanation from the airlines about how they were using the slots alloted to them as mass cancellation affects the passengers.
Bhushan said some of the replies from the airlines have been received by DGCA and it was found that Kingfisher Airlines was not using 35 per cent of its slots, which "is a large number".
DGCA insisted that despite Kingfisher Airlines' assurance, it has been asked how it is going to reconfigure with just three of its aircraft not being in service.
"If they are going to have 30 aircraft reconfigured, how is it that only three aircraft will be involved in it at any given point of time? So, they have been asked to submit
more details," Bhushan said.
Kingfisher seeks hike in bank loan limit to meet rising costs
Ailing Kingfisher airlines said it has not asked for a bailout from the government but
admitted requesting banks to increase the loan limits to enable it meet rising operating costs due to increase in fuel prices and rupee devaluation.
"Kingfisher has not made any bail out request to the government. We have only asked our banks for an increase in limits due to significant increase in operating costs caused by increase in fuel prices and rupee devaluation," Sanjay Aggarwal, CEO, Kingfisher Airlines, said in a statement.
On the DGCA showcause notice on flight cancellations, he said: "We did not feel the need for informing DGCA. In hindsight, we should have informed them and we apologised to
them for the same."
On speculation about the closure of the airlines, he said Kingfisher does not see any risk to its future or long term viability.
Though the airline had maintained that the flight operations will normalise after November 19, the reconfiguration initiative will require up to 3 aircraft to be out of service over the next three months at any one time for this exercise to be completed.
"It will reduce the number of fleet configurations from 7 to 3, improving operational flexibility. This initiative will add more seats to the fleet, improving revenue production of
each aircraft," he said.
BJP disfavours bailout for Kingfisher
The issue of bailout of ailing airline Kingfisher got political colour with BJP expressing
itself against such "Communist-era practice" while Congress treaded cautiously.
"There is no case for a government bail-out of Kingfisher Airline.... We cannot support such a step. The practice during Communist era when the government used to take over sick private sector units and run them at a huge cost and loss to the government has been given up," BJP leader Yashwant Sinha told reporters.
At the AICC briefing, party spokesman Manish Tewari struck a cautious note. "It will be better if you ask the question to the Civil Aviation Minister. You are raising a fundamental issue whether government should take the initiative to bailout a private company or not. In what context the government has taken the decision, he can better explain".
Tewari insisted it was a conceptual issue whether in a market economy the government should go the extra mile to bail out a sick company or allow a shakeout to take place
which will ensure survival of the fittest.
New Delhi: Beleaguered Kingfisher Airlines on Friday sought government help for a bailout on a day when its shares crashed to a record low amid continuing debt fears, as it cancelled more flights for the fifth straight day with 40 flights being withdrawn.