Kingfisher Airlines Ltd plunged deeper into crisis as the Vijay Mallya-run carrier was forced to extend flight cancellations for almost another month in the face of an unprecedented cash crunch.
The move came as the board met on Monday to decide on a possible fund infusion by the promoters. No announcement had been made as of press time.
The flight cuts, initially scheduled to run until 19 November, were extended to 15 December, according to a note sent to travel agents that was reviewed by Mint. While the company had put the number of daily cancellations at 31, an airline official said it will be operating 290 flights a day compared with about 345 earlier, a reduction of about 55 flights.
The cancellations have left passengers vulnerable in the middle of the peak season for air travel and the possibility of fares surging just before the end-of-the-year holiday break.
The carrier is preparing a plan to infuse equity by the promoters into the cash-strapped firm as sought by its banks, including State Bank of India (SBI), the largest lender to the carrier, said a second Kingfisher executive. Both executives didn’t want to be named.
The airline has so far not communicated anything to this effect to its bankers, said an executive at a bank that has exposure to the carrier.
Bankers are expected to meet the airline management next week to hear what measures it is taking, such as cash infusion, to mitigate the ongoing crisis.
Mallya will hold a press briefing on Tuesday to announce the airline’s second quarter financial results, Kingfisher said in a press release.
Jet Airways (India) Ltd has announced a consolidated loss of Rs 814 crore for the quarter while budget carrier SpiceJet Ltd said it lost Rs 240 crore.
Jet lost an average Rs 9 crore a day while SpiceJet lost Rs 2.6 crore a day. Kingfisher posted a loss of Rs 1,027 crore in the year ended 31 March, by which time it had accumulated Rs 7,057.08 crore of debt.
Mallya has sought government help to secure additional working capital loans to bail out the carrier, which hasn’t made a profit in the six years it’s been operating. Banks had to take a haircut earlier this year when they converted debt into equity at a premium of more than 61.6% to the airline’s prevailing stock price.
SpiceJet joined those opposing a bailout for the airline.
“Why should there be any bailout for a private air carrier? I do not see any logic why taxpayers’ money should be used to bail out a private company,” SpiceJet chief executive Neil Mills said. Industrialist Rahul Bajaj also opposed any rescue by the government. “Those who die, must die” in a free economy, he said.
The opposition has opposed any bailout move and criticized Prime Minister Manmohan Singh’s statement on Sunday that the government plans to find “ways and means” to help Kingfisher Airlines.
“It is very disturbing to listen to the Prime Minister saying that Kingfisher needs to be bailed out by the government. In fact, the losses incurred by Kingfisher should be recovered from the earnings of UB Group, which is also owned by Mallya,” Sharad Yadav of the Janata Dal (United), a member of the opposition National Democratic Alliance, said in New Delhi. “I want to warn the government that this is not acceptable at any cost... After this, there would be a long list of companies showing losses and asking for packages.”
Mallya had, in a post on microblogging site Twitter on Sunday, welcomed Prime Minister Singh’s statement.
“The Hon’ble PM is an economist and understands the importance of connectivity that goes together with economic growth,” he said in his tweet. “Why such debate then?”
In April, a consortium of 13 lenders, including SBI and ICICI Bank Ltd, bought a 23.21% stake in Kingfisher Airlines. SBI picked up a 5.67% stake and ICICI Bank 5.3%. Kingfisher Airlines, which converted Rs 750 crore of its total debt into equity, allotted shares to lenders on 31 March at Rs 64.48 a share.
On Monday, the Kingfisher share gained 8.65% toRs 21.35 even as the benchmark Sensex lost 0.43% to 17,118.74 points.
ICICI Bank chief Chanda Kochhar said her bank’s exposure was low and that there were no dues. She said the exposure was well covered through securities and cash flows outside of the airline as well. Kochhar was talking on the sidelines of World Economic Forum’s India Economic Summit in Mumbai.
Travel agents said the consumer confidence in the airline has slumped.
“Yes, we are booking on Kingfisher,” said a senior official with a travel website, who declined to be identified. “But customer confidence has taken a big hit and sales have come down to almost half of what we were doing prior to this mess.”
PTI contributed to this story.