New Delhi: Kingfisher Airlines Ltd is struggling to stay afloat as it deals with multiple financial and operational issues, including debt of Rs 7,057.08 crore as of 31 March, a continuous run of losses, disputes over leases and grounded planes. The latest moves by India’s second largest carrier as part of the revival exercise include doing away with the low-fare Kingfisher Red brand. That announcement by chairman Vijay Mallya on Wednesday grabbed the most attention on a day when the carrier held its annual general meeting (AGM) in Bangalore. The AGM was, among other things, meant to instill confidence among shareholders worried about the company’s future.
The low-fare division comprises the rebranded Air Deccan, which Kingfisher acquired in 2007.
Sanjay Aggarwal, CEO, Kingfisher Airlines
The company is taking a contrarian call in a market known for customers who demand value for money. Market leader Jet Airways (India) Ltd, for instance, is increasing the proportion of economy class seats on its planes.
With Kingfisher reverting to its original model of being a full-service airline across all categories, all planes will get business class seats. At the same time, it will also squeeze in more economy class seats.
Kingfisher chief executive officer Sanjay Aggarwal, who moved to the airline from budget carrier SpiceJet Ltd last year, spoke in an interview about the reasoning behind the shift in strategy, issues with aircraft lessors and the future of the carrier. Edited excerpts:
We understand that there have been defaults in payments to international aircraft lessors and some of them have sought to repossess planes, others have said they will not renew leases. You have had meetings with them in London.
We are in constant touch with our lessors. I believe your views are ill-founded.
So there are no defaults?
There is no impounding of aircraft as far as we are concerned. There is a difference... As I have said, we are in constant dialogue with them.
Of the 66 aircraft in your fleet, seven ATRs and some A320s are grounded because of lack of spares. Is that not harming operations or is it better to ground them rather than fly in the current market?
The figure is not that high. Some of the ATRs are grounded for scheduled maintenance, which any airline would have at any given time. Plus the Airbus A320 problems that we ran into last year (over half the A320 fleet was grounded because of engine problems), we are completely not out of it. From 14 aircraft (that were grounded) we are down to four, out of which two will be back in service soon. Yes, we are not out of the woods yet, but we will be there soon.
What changes with the end of Kingfisher Red?
It will all be a dual-class configuration, business and economy on (the) A320, all ATR aircraft will have a single configuration—Kingfisher class. The entire airline will be full service. There will be fewer first-class seats and more economy seats.
How would you qualify full service?
The first element of a full service is selling tickets through a GDS (global distribution system), which is what we are already doing; a strong loyalty programme like the King Club; third is the network with regional connectivity, lounge access for our guests. So it’s just the meal approach on our flights which will change. There will be no selling of food, but all this will take about four months.
Did you hire a consultant to determine that you need to go back to the full-service model?
No. Most of the things we are already doing. This is based on our customer feedback and our internal assessment, which says they have a clear leaning towards our Kingfisher class product. The conclusion was clear. They were looking for a simplified business model and that’s what they expect from this.
Jet Airways has been converting most of its flights to an all-economy configuration, while you are planning to instal business class seats in single-class aircraft.
It’s unfair to comment on the Jet model. They have their own assessment and we have our own of where we need to go. They are making their own choices. We are taking this route keeping the competitive and market environment around us.
We understand the airline will have 8-12 business class seats and the rest economy versus the current configuration of 21-32 business class seats and 114-158 economy ?
I wouldn’t want to specify that for commercial reasons.
Overall, the number of seats you offer in the market will go up by 10%. How much will the revenue go up by?
I think we will be adding 10% more capacity in the market and it will be at just a one-time cost to the company (by way of additional seats). There would be some revenue increase, but it’s not fair to calculate it right now.
There have been several announcements on fund-raising. When do you expect the funds to actually come in?
The board has already approved a rights issue, and we have the ability of going for a GDR (global depositary receipts). We are pursuing both. We are optimistic on an investment in the near future.