Mumbai: Vijay Mallya denied that the chief executive officer of his Kingfisher Airlines Ltd had quit, as the carrier laboured under a mountain of debt and was again barely able to get its planes into the air on Wednesday, with flight cancellations continuing to leave passengers stranded.

CEO Sanjay Aggarwal submitted his resignation, said three Kingfisher Airlines executives who didn’t want to be identified, adding that he would serve the airline until March-end. Company chairman Mallya responded with a terse “not correct” SMS when the question was put to him. Aggarwal, who was appointed CEO on 30 September 2010, didn’t respond to calls and text messages.

The government and the central bank both signalled their support for a bailout of the airline. A deputy governor said the regulator wouldn’t stand in the way of banks giving more money to the airline, a minister said the carrier should be saved, and the commerce ministry released a notification on the direct import of jet fuel to help save on taxes.

The carrier has cancelled as many as 50 flights a day since 17 February owing to a cash crunch.

“Kingfisher has submitted a revised network schedule, wherein the carrier will fly 175 flights a day on domestic routes and 24 flights a day on international routes with 28 aircraft. We will examine the same and approve,” E.K. Bharat Bhushan, director general of civil aviation, told Mint. That compares with up to 340 flights a day last year.

The reduction of total planes in operation to 28 from 64 by Kingfisher Airlines will result in a sharp sequential fall in revenue along with the adverse impact on consumer sentiment, owing to massive flight cancellations, said Rashesh Shah, an analyst at domestic brokerage ICICI Securities Ltd, who tracks Kingfisher.

“It will be a double whammy as the current quarter is traditionally weak considering the travel demand,” he said. “Kingfisher Airlines has not disclosed what are they doing with the grounded planes and how are they paring the debt.”

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Kingfisher’s third quarter loss widened as it cut flights during the peak season. Operating costs rose on high jet fuel prices and as the rupee weakened against the dollar.

The Mumbai-based airline reported a loss of Rs444.26 crore in the three months ended December against a year-ago loss of Rs253.69 crore. Sales fell 15.2% to Rs1,342.32 crore. Kingfisher, which has never reported a profit since its inception in 2005, had debt of Rs7,500 crore as on 30 September. It posted a loss of Rs1,027 crore on sales of Rs6,496 crore in the year ended March 2011 and Rs1,647 crore loss on sales of Rs5,271 crore in 2010.

The income-tax (I-T) department’s freeze on Kingfisher’s accounts continued as the carrier sought to get this lifted and proposed a repayment plan for its dues. On Monday, the airline said it had to cancel several flights as the I-T department had attached the accounts as taxes hadn’t been paid. “As of now, the freeze on Kingfisher Airlines continues,” said a senior I-T department official, requesting anonymity.

Shares of Kingfisher Airlines dropped 6.53% to Rs25.05 on BSE on Wednesday, while the Sensex fell 1.54%.

The ministry of commerce and industry said late on Wednesday that Indian carriers interested in directly importing aviation turbine fuel, without going through government-run state trading enterprises, should apply to the Directorate General of Foreign Trade. By importing jet fuel directly, airlines will theoretically be able to avoid sales tax, which varies between 4% and 30% across states. The commerce ministry announcement came after market hours.

Kingfisher had lobbied hard to convince the government to allow airlines to import fuel directly. It is in talks with Reliance Industries Ltd for the use of its infrastructure to supply fuel that’s directly imported.

Separately, Reserve Bank of India deputy governor K.C. Chakrabarty said on Wednesday that the central bank was not opposed to banks lending to cash-strapped Kingfisher if they are confident about recovering their money. The loans to the carrier are categorized as non-performing assets on the books of eight of 18 lenders. Mint reported on Tuesday that the remaining 10 are to provide a Rs200 crore lifeline for working capital needs.

Corporate affairs minister M. Veerappa Moily said bad governance and absence of professional management had failed Kingfisher, but that as a minister he wanted the airline to be saved. A strategy should be worked out that is acceptable to the finance ministry to save Kingfisher, he added, without elaborating. Moily was speaking on the sidelines of a function in Mumbai.

Before joining Kingfisher, CEO Aggarwal headed India’s second largest low-fare carrier SpiceJet Ltd, which became profitable during his tenure. He was chief operating officer of Flight Options Llc, the world’s second largest private jet provider, before that assignment. Aggarwal also spent four years with Marriott International Inc. as senior director (information technology, strategic and operations planning).

pr.sanjai@livemint.com

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