To win back employee confidence, Kingfisher Airlines Ltd’s new chief executive Sanjay Aggarwal has promised fresh staff benefits in a letter to employees.
He also outlined the progress of the airline’s financial restructuring and said Kingfisher is looking to raise $250-350 million (Rs 1,125-1,575 crore) through global depositary receipts (GDRs) by the end of January.
Priority list: A file photo of Kingfisher Airlines’ new chief executive Sanjay Aggarwal. Madhu Kapparath/Mint
It’s obvious why employees are top priority for Aggarwal, who joined Kingfisher on 30 September from low-fare carrier SpiceJet Ltd.
About 150 pilots have exited the airline the past year—one-third of them in the past three months alone. Some senior executives—vice-president of training N.P. Puri; vice-president of marketing Vikram Malhotra; executive vice-president Ramki Sundaram; and vice-president of operations D.D. Gandhi—too have left.
“We are also looking at employee policies and benefits... we are working on a plan whereby every employee will be entitled to receive 20 one-way vouchers per year. These vouchers will allow you to buy a confirmed domestic ticket for Rs 2,500...,” Aggarwal said in his letter dated 10 December. That would mean about 120,000 tickets a year for Kingfisher’s 6,000-odd employees.
In the letter, which Mint has reviewed, Aggarwal also points to steps undertaken to lift the airline’s sagging fortunes.
“The most significant development has been the progress that we have made to restructure our debt. I am happy to share that this process is expected to be complete in the next two-three weeks,” he says. “Immediately after the restructuring, we plan to launch GDR to raise $250-350 million. The combination of restructuring and GDR will allow us to clear past issues and invest in our future.”
Kingfisher’s debt recast, after the Reserve Bank of India allowed an exception, involved converting lender debt up to Rs 1,355 crore and promoter debt up to Rs 648 crore into share capital. The company had Rs 8,000 crore in debt as on 30 September.
“Once the entire restructuring exercise is complete, we will then be able to renegotiate better rates with our key vendors leading to a more efficient cost structure,” Aggarwal says.
The CEO adds that at least seven grounded aircraft will be back in the air in three-six months. Kingfisher will also bring back more business-class seats over the next six months as demand picks up.
“In the next few months, we will also be reducing the variety of seat configurations we have on the A320 family. This will improve flexibility and give us an optimal mix of first and economy class seats,” Aggarwal says.
Kingfisher faced a duplication of aircraft when it merged Air Deccan with itself in 2008 after acquiring the low-cost airline. Air Deccan had a single-class configuration of A320s with 180 all-economy seats while Kingfisher flew aircraft with dual-cabins including business class seats.
Several of the additional aircraft were sent back to lessors as Kingfisher’s fleet was reduced to 66 from 81, shrinking the airline’s domestic passenger market share to 19% from 28% in 2008.
An Mumbai-based analyst with a domestic brokerage, who asked not to be identified, said the real impact on Kingfisher’s balance sheet from the restructuring could be gauged only when the contours of the deal are made public.
“There is an improvement; it is also in Jet, SpiceJet,” he said, referring to the double-digit growth in the aviation market. “As far as debt recast is concerned, it’s good for the company. Whether it’s good for shareholder(s) I don’t know.”
Aggarwal’s tone strikes a more positive note than the letter Kingfisher’s employees were handed last year.
At that time, Kingfisher’s executive vice-president, Hitesh Patel, had asked them to adjust to delayed salaries saying “the chairman (Vijay Mallya) is out there, fighting a lonely and difficult battle to manage funds so that the salaries can be paid on time”.
The airline has defaulted on payments to oil companies, the Airports Authority of India and some vendors in the past two years. As of 15 November, it owed Rs 417.10 crore to oil companies alone, according to the aviation ministry.
But Kingfisher has narrowed its loss to Rs 418 crore for the fiscal half-year ended 30 September from a loss of Rs 1,647 crore in the year-ago period.
The airline’s shares ended trading at Rs 63.50, up 0.79%, on the Bombay Stock Exchange on Tuesday, only slightly faster than the Sensex index’s 0.55% rise to 19,799.19 points.