Mumbai: Vijay Mallya, chairman of loss-making Kingfisher Airlines Ltd, said on Tuesday it was too early to write off the carrier, which is saddled with about $1.5 billion (Rs7,590 crore today) in debt and has been cancelling around 50 flights a day to cope with a cash crunch.

“It is not fair to write us off, do not write our epitaph," he said.

He also presented a plan to revive the fortunes of the airline, India’s second largest by passengers carried. Mallya’s briefing came after the airline said losses in the quarter to September had widened to Rs468.66 crore from a Rs230.81 crore loss in the year earlier. The cancellations that began on 8 November have been extended to 15 December.

Turbulent times: A Kingfisher aircraft. The airline is cancelling orders for two Airbus A340 planes and postponing the purchase of five A380s. Photo: Bloomberg

“Kingfisher Airlines’ accounts with banks are standard. We have not defaulted on any loans or interest to be paid," he said. “We could have handled the flight cancellations in a better way. We made some mistakes."

Mallya said he has been in talks with banks, seeking ways to reduce interest costs. Kingfisher was cutting costs, looking to induct a strategic domestic investor and rationalizing the fleet.

It is cancelling orders for two Airbus A340 planes and postponing the purchase of five A380s, besides exploring options to import jet fuel directly.

Kingfisher’s loss widened as its jet fuel costs surged 70.21% to Rs816.81 crore in the September quarter, obliterating any gains from the 10% increase in sales to Rs1,528.16 crore.

Mallya’s statements drove up the Kingfisher stock after it slumped 4% in early trade—it closed 2.34% up at Rs21.85 on BSE on Tuesday.

However, investors rushed to sell other airline stocks—SpiceJet Ltd fell 5.65% to Rs21.70 and Jet Airways (India) Ltd slipped 8.1% to Rs238.70. In the last three days, the Kingfisher stock has gained 11.2% on hopes that cash infusions may be forthcoming.

Viability is a big challenge for the carrier, said D.K. Aggarwal, chairman and managing director of domestic brokerage SMC Investments and Advisors.

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Kingfisher chairman Vijay Mallya asserts his airline is not looking for a bailout and describes how it plans to survive the bad times.

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“Going forward, promoters will need to infuse more capital in the company to ensure viability and existence in a tough market scenario," he said.

Kingfisher hasn’t made a profit since its start in 2005. It made a net loss in the year ended March of Rs1,027 crore on total income of Rs6,496 crore.

Following a debt recast, a consortium of 13 lenders took a 23.21% stake in Kingfisher in April. Debt as of 30 September stood at Rs7,544 crore.

SBI Capital Markets Ltd drew up the debt restructuring plan for Kingfisher.

The merchant banking arm of State Bank of India (SBI) is working on the “long-term viability of the company" to arrange funds from banks, said Kingfisher CEO Sanjay Aggarwal.

SBI chairman Pratip Chaudhuri said on Sunday that Kingfisher has to bring in at least Rs400 crore of equity from other businesses to rescue the carrier. On Tuesday, it appeared the airline had been able to convince lenders about its viability.

“Loans given to Kingfisher are a standard asset on SBI’s book and on the books of all other lenders in the consortium. There are no issues as far as the asset quality is concerned as of now," said A.P. Verma, chief credit risk officer at SBI. “The exercise of conversion of part of the loans to equity and asking more guarantees were done nearly one year back when the loan restructuring of Kingfisher took place. There are no such plans now."

SBI has asked the company for a detailed blueprint for its revival, Verma said. Kingfisher executives said the carrier will submit its proposal by next week.

“Banks have never asked (us) to bring in more money," Mallya said.

Mallya said an Indian strategic investor has approached Kingfisher for a possible investment, without divulging details.

He called on the government to allow foreign airlines to invest in Indian carriers, but did not specify whether he is in talks with any such overseas entities.

Mallya has approached the Directorate General of Foreign Trade to allow the direct import of jet fuel to bring down costs. SMC’s Aggarwal said this could lead to savings of 8-10%.

The airline is also exploring the option of spinning off its frequent flyer programme into a different entity, said Ravi Nedungadi, president and chief financial officer of UB Group.

Nedungadi said the promoter group has already pumped in nearly Rs800 crore since the beginning of the year and is willing to support the airline.

Most other UB Group stocks fell on Tuesday. McDowell Holdings Ltd lost 4.77% to close at Rs47.90, United Breweries Holdings Ltd lost 2.66% to end at Rs82.40, UB Engineering Ltd lost 7.05% to finish at Rs41.50 and United Spirits Ltd lost 11.09% to close at Rs767.15.

Nedungadi said the airline has at least $200 million held with its lessors as maintenance reserve. “We are talking to banks to issue a letter of credit to lessors to release $200 million," he said.

The airline is in the process of filing for a Rs2,000 crore rights issue, Nedungadi added.

“These are all short-term strategies," said a senior airline consultant, who has been advising private and foreign airlines. “The airline has to go for a major overhaul."

Dinesh Unnikrishnan and Ashwin Ramarathinam contributed to this story.