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Kingfisher seeks Govt help, cancellations continue

Kingfisher seeks Govt help, cancellations continue
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First Published: Fri, Nov 11 2011. 05 57 PM IST

Updated: Fri, Nov 11 2011. 05 57 PM IST
New Delhi: Union civil aviation minister Vayalar Ravi on Friday said he would talk to finance minister Pranab Mukherjee to get financially-troubled Kingfisher Airlines assistance from banks.
The minister is also talking to state governments to reduce sales tax on aviation fuel, Ravi told TV channel Times Now.
Shares of the cash-strapped carrier slumped 18% to a life low on Friday as the airline continued to cancel flights and newspapers reported leasing companies were planning to take planes back and pilots were leaving.
Earlier, the airline’s chief executive officer Sanjay Aggarwal told television channel NDTV Profit 100 pilots had quit over the past months, but said it was part of natural attrition and the current cancellations were not on account of staff shortages.
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Kingfisher, India’s second-largest private airline, run by liquor baron Vijay Mallya, has struggled to raise cash to operate its cost-intensive business in a highly competitive market place.
It had cancelled scores of flights daily since Sunday in an effort to cut capacity and minimize costs, leaving passengers stranded as the Indian travel season enters the peak period.
“There is no doubt in our mind as a management team or Dr Mallya as a promoter of the airline, or the UB Group, about the credibility or the future of the airline,” Aggarwal said.
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BJP not in favour of govt bailout
The Bharatiya Janata Party (BJP) is opposed to any move by the government to bail out debt-ridden Kingfisher Airlines that cancelled flights to minimize losses and urgently needs cash to escape a collapse.
“If Kingfisher is not in a position to run on a financially viable basis then it should find its own way ... There is no case for a government bailout,” Yashwant Sinha, a senior BJP leader and former finance minister, told TV channels on Friday.
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The Economic Times reported on Friday that some companies who have lent aircraft to the loss-making airline planned to take them back. It also said the director general of civil aviation (DGCA) had sought an explanation from the airline for the mass cancellation.
A Kingfisher spokesman declined to provide immediate comment to Reuters.
Six weeks ago Kingfisher had announced intentions to recast its business model by doing away with its low-cost service Kingfisher Red.
It said on Tuesday it has started reorganizing its aircraft in an effort to focus on the full-service market and that required some of its flights to be out of service for the next few weeks. Once the reconfiguration is complete the aircraft will be pressed back in service it said.
“No shutdown, only ensuring loss minimization by a flight rationalization and enhanced revenue through reconfiguration of aircraft,” Chairman Vijay Mallya was quoted by Economic Times as saying on Friday.
Struggling to survive
Kingfisher shares have lost more than 67% of value so far this year. The airline, which started business as a full service carrier in 2005 and listed when it bought out budget airline, Air Deccan in 2008, has never made a profit.
Its auditors noted in the annual report this year that the firm needs extra cash to survive in a challenging market.
Kingfisher had aimed to raise $250-$350 million through an issue of global depositary receipts in January but did not follow through on the plan. It also tried to attract private equity investment in 2008 and 2009 but no deal was forthcoming.
Earlier this year, Kingfisher cut its debt through a restructuring by issuing shares to 14 banks, including State Bank of India and ICICI Bank. But its problems continue.
Just last week it said it had written to banks for further help by substituting high-cost rupee borrowings with lower cost foreign currency debt and asked them to consider the weakening rupee and high international fuel prices when appraising its working capital requirements.
“The only way out is they sell a stake to a foreign airline company if the government passes the rule anytime soon, which I think they can, given the circumstances of the whole industry,” said Sharan Lillaney, analyst at Angel Broking.
India currently allows foreign investment of up to 49% in Indian carriers, but foreign airlines are not allowed to invest directly or indirectly in domestic carriers.
But India’s industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers.
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First Published: Fri, Nov 11 2011. 05 57 PM IST