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Kingfisher to go slow on new aircraft induction

Kingfisher to go slow on new aircraft induction
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First Published: Thu, Feb 25 2010. 12 50 AM IST

Photograph by Ramesh Pathania; graphic by Yogesh Kumar/Mint
Photograph by Ramesh Pathania; graphic by Yogesh Kumar/Mint
Updated: Thu, Feb 25 2010. 12 50 AM IST
New Delhi: Kingfisher Airlines Ltd, India’s second biggest carrier by passengers flown, is taking a cautious road to expansion and refraining from adding aircraft to its fleet of 66 this year.
The airline will instead use its existing aircraft and raise money through global depository receipts (GDRs) and a rights issue over the next 8-10 weeks, chairman Vijay Mallya said on Tuesday evening.
Photograph by Ramesh Pathania; graphic by Yogesh Kumar/Mint
Mallya had earlier in February said in a statement the airline may look at inducting “new aircraft into our fleet sooner than planned so that we are fully geared to capitalize on the upturn”.
The airline is expecting the first lot of new deliveries from January.
Two of Kingfisher’s five wide-body Airbus A330 aircraft, which have stayed on the ground for around six months, now waiting for ministry approvals for the London-Delhi and Hong Kong-Delhi routes, will start flying this summer, while its A320 aircraft will tap the Bangkok, Colombo and Dubai routes.
“We are utilizing only three of them. We have two A330 idle and we have been incurring a fairly significant standing cost,” Mallya said.
“These two A330 will now operate on the Delhi-London Heathrow sector and Delhi-Hong Kong sector, so we will have better utilization and more revenue from these two planes,” he added.
The Mumbai-based airline, saddled with at least Rs6,000 crore in debt and Rs1,075.32 crore in losses in the nine months ended 31 December, is taking a measured approach to growth and profitability after going through a rough patch last year, when it defaulted on payments to suppliers and saw a slew of top management exits.
“Basically, we don’t need more aircraft,” Mallya said after launching G.R. Gopinath’s book Simplify Deccan. “Getting aircraft to add to our fleet is something I will think of, perhaps, towards the end of the year if this upturn is fully sustained.”
The low-fare carrier Air Deccan launched by Gopinath is now part of Kingfisher after it was bought over and later merged in 2008.
Mallya is also hoping Seabury Group Llc, the US-based aviation consulting firm Kingfisher recently hired, will help the airline raise funds from the market, something it has been seeking to do for over a year.
“A Seabury sign-off on any airline brings a lot of credibility amongst international investors and so we thought we could bring Seabury in particularly before we launch an issue where we will seek foreign investment as well,” he said.
Mallya said the size of Kingfisher’s GDR issue is being worked out. Both the GDR and rights issues are being “fast-tracked”, Mallya said.
Mint reported earlier in February Kingfisher was appointing Seabury, which has helped secure funding for several bankrupt airlines in the US, ahead of it raising funds.
Kingfisher, which has signed a pact with Oneworld Alliance, a global grouping of airlines, to be a part of it by 2011, will look to use the alliance’s hubs for its international operations—unlike rivals Jet Airways (India) Ltd, which has its international operations based out of Brussels in Europe, and Air India, which operates abroad from Frankfurt.
Airline alliance membership will, however, have a cost attached to it, which the carrier has so far not disclosed.
Besides, “the costs of integration from a process and systems perspective run into several millions of dollars”, Vikram Krishnan, an analyst with US-based aviation consultancy Oliver Wyman, said in an email.
Air India has paid $10 million (Rs46.3?crore)?so far to Star Alliance but is still to join it.
For passengers, the alliance would mean they can earn and burn their frequent flier miles not just on Kingfisher but also on member carriers, depending on the agreements.
tarun.s@livemint.com
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First Published: Thu, Feb 25 2010. 12 50 AM IST