Mumbai: A defiant Kingfisher Airlines chairman Vijay Mallya sought to assuage worries about the future of his airline but offered few new concrete measures for reviving the Indian carrier’s finances after its quarterly loss had doubled.

Investors have grown increasingly worried over the carrier’s ability to remain aloft in a fast-growing but loss-making industry, knocking the shares to an all-time low on Friday after it cancelled scores of flights during the week.

Kingfisher, named after its parent firm’s best-selling beer, has also been late paying salaries.

Mallya, a flamboyant liquor baron who also owns a Formula One racing team, said Kingfisher had not asked banks to “take a haircut" but was looking for ways to reduce the interest cost on its $1.3 billion debt and add working capital.

He called on New Delhi to allow foreign airlines to buy stakes in Indian carriers and said Kingfisher had applied with authorities to directly import fuel. Taxes make jet fuel in India 60-70% more expensive than the global average.

Mallya also stood behind Kingfisher’s decision to stop flying unprofitable routes, which drew rebukes last week from the government and stranded passengers who had not been informed in advance.

A closed sign is displayed at a Kingfisher Airlines booking counter in Mumbai. AFP

“We cannot, as a private company, afford to fly on routes that are heavily loss-making. We are not in the same arena as the national carrier," he told a crowded media briefing that began nearly two hours late, referring to state-owned Air India.

Kingfisher shares ended 1.9% higher on Tuesday, defying a market sell-off. The stock has lost 67 percent since the start of the year, shrinking its market value to $213 million.

“This industry needs some structural reforms. The impractical competition among players has driven down ticket prices and the high fuel cost is also hitting very badly," said Sharan Lillaney, an airline analyst with Angel Broking.

Debt restructuring

Kingfisher has been asked by its creditors to raise $160 million in equity. Hemant Contractor, managing director of creditor State Bank of India, had said on Monday the airline was considering a proposal to sell real estate, but Mallya denied the firm was considering that course of action.

The carrier, which has never turned a profit since its launch in 2005, saw its fuel bill jump 70% in the September quarter from a year earlier.

While passenger revenue rose 9%, its revenue per average seat kilometre fell by 16% from a year even as its cost per average seat kilometre rose 8%.

Earlier this year, Kingfisher, India’s No.2 carrier by market share, cut its debt through a restructuring by issuing shares to 14 banks, including State Bank of India and ICICI Bank , the country’s two biggest lenders.

Kingfisher’s net loss in the quarter ended 30 September deepened to 469 crore ($93 million) from 231 crore in the year-ago period. Its loss was its biggest since the March 2010 quarter.

“While all airlines have taken a deep hit this quarter because of high fuel prices, Kingfisher is in such a bad shape that they need to look for funds to stay afloat," said Neeraj Dewan, director at New Delhi-based Quantum Securities.

Bleeding sector

Despite passenger traffic on track to grow at roughly 17-18%, the Centre for Asia-Pacific Aviation (CAPA) expects Indian airlines to lose at least $2.5 billion in the fiscal year that ends in March, with state-owned Air India likely to account for more than half of that.

Air India has long been on government life support, and some in the industry blame it for pushing prices below cost.

“They continue to initiate below-the-belt pricing, but then everybody else follows it," said Kapil Kaul, CAPA’s chief executive for the Indian subcontinent and Middle East.

Private carriers Jet Airways, the country’s largest airline, and budget operator SpiceJet, also reported losses in the September quarter.

Kingfisher has become one of the main casualties of high fuel costs and a fierce price war between a handful of airlines which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.

Airport charges are also rising, said Jasdeep Walia, an analyst at Kotak Securities.

“The cost environment is ... becoming severe from all sides and you cannot pass it on to the market because of the state-run carrier’s pricing policy," Walia said.

New Delhi is considering lifting its ban on direct investment in the sector by foreign airlines, according to media reports, which could provide a lifeline to Kingfisher if it finds an investor.

“In a market that is growing at 18 to 20%, there is no reason why anybody should be making losses," Sudheer Raghavan, chief commercial officer at rival Jet Airways told an analysts’ conference call on Monday.

“At the end of the day, it is a highly competitive market and, this being a perishable product, there is always pressure to drop fares," he said.

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