Kingfisher's Mallya: Shutting down 'not an option'

[alberttky 0]

Kingfisher Airlines (IT) founder and chairman Vijay Mallya vowed to keep the troubled airline operating even as it continues to cancel flights and fails to make numerous scheduled payments.

 

The airline has had trouble making payroll and its planned entrance into the oneworld alliance this month was postponed.

 

India's Directorate General of Civil Aviation said in a December report that "a reasonable case exists for withdrawal of [iT's] airline operator permit as their financial stress is likely to impinge on safety".

 

But despite all of the trouble, Mallya was defiant in an interview with The Times of India published Monday, providing his most extensive public comments on IT's financial crisis.

 

"Closing down is not an option," Mallya told the newspaper. "It will not happen. Government does not want it to happen. It is not in the national interest." However, the Indian government has indicated it won't bail out privately held carriers such as IT.

 

Mallya said the airline will get "help. Help is not bailout. We have asked banks to consider our proposal to provide more working capital."

 

Regarding dozens of flight cancellations in recent days, he told the newspaper, "The abrupt disruption was unfortunate because our bank accounts were suddenly frozen by tax authorities. I don't deny we have taxes due. The bottom line is we requested for time to pay these dues."

 

http://atwonline.com/airline-finance-data/news/kingfishers-mallya-shutting-down-not-option-0221

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I think this guy is seriously drunk from his beer...

[Y. J. Foo 0]

If he wants to keep IT in the air then he may have to fork out his own money to bail it out. The question is: will/can he?

[JuliusWong 0]

Kingfisher’s nosedive poses dilemma for Indian government

February 26, 2012

 

 

A Kingfisher Airlines aircraft taxis on the tarmac at Mumbai’s domestic airport February 21, 2012. As Kingfisher Airlines careens toward collapse, the Indian government finds itself between a rock and a hard place. – Reuters pic

 

NEW DELHI, Feb 26 – As Kingfisher Airlines careens toward collapse, the Indian government finds itself between a rock and a hard place.

 

The government, already weakened by a string of corruption scandals over the past year, will face further political heat if it tries to rescue a money-losing private carrier – especially one owned by a flamboyant liquor baron.

If it lets Vijay Mallya’s airline fail, however, the government will hurt state-run banks, which own about a fifth of Kingfisher’s shares and three-quarters of its US$1.3 billion (RM) debt.

Kingfisher is struggling with fewer flights and pilots, staff demoralised by unpaid salaries, and outstanding dues to aircraft lessors, oil companies, airports and tax authorities.

It needs at least US$400 million quickly to keep flying, figures Centre for Asia Pacific Aviation (CAPA), a consultancy . Mallya’s plans to raise funds through a share sale have been stalled and he has been lobbying the government to get state-run banks to lend more.

But a senior executive at State Bank of India (SBI) , the lead lender to Kingfisher Airlines, said at the weekend it would not consider any fresh loans for the carrier until it raised new equity itself.

“Everything depends on equity infusion – how much comes in, whether that will meet the requirements,” the bank’s Deputy Managing Director, R. Venkatachalam, said in an interview on Saturday in his Mumbai office. “First it has to come.”

The fast clip at which the government has moved to change regulations in the past two months – airlines can now directly import fuel, lowering their costs, and private carriers can fly overseas more – has lifted expectations that Mallya may eventually win the help he needs from the government.

“India: Kingfisher’s national carrier,” one Tweeter quipped last week.

A government bailout for a private carrier would not go down well with the public in India, where airlines are still not the common man’s preferred mode of travel. Conscious of that, the government insists it is not looking to bail Kingfisher out.

Mallya avoids the bailout word too and, instead, says he is only asking for more working capital, which Aviation Minister Ajit Singh says is up to the banks to decide on.

However, late last year Prime Minister Manmohan Singh spoke of finding ways to help Kingfisher, which has led many to believe that in the end the government will come to its rescue.

“Is the government being duplicitous about its stand on the increasingly distressed Kingfisher Airlines?” the daily Business Standard wrote in an editorial, advocating no more funds from state banks for a carrier that wasn’t ‘too big to fail’.

 

A RISK FOR THE GOVERNMENT

Saving a private airline would be risky for Singh’s government, which has faced pressure from allies, political opponents and civil activists for more than a year over graft.

“After all the charges of crony capitalism ... if the government rolls out the red carpet for Kingfisher, it will once again come under attack,” said Paranjoy Guha Thakurta, a political analyst.

Mallya, whose liquor business clout helped win him a seat in the upper house of parliament two years ago, could use his political ties to save the carrier he started in 2005.

Allowing foreign carriers to buy a stake in Indian carriers is probably the key policy step Kingfisher desperately wants the government to take. Unlike in 2007, when ailing airlines were bought over by Kingfisher and Jet Airways, there are no domestic carriers circling to buy up rivals today.

“In the short term, it is in urgent need of money. If they get about US$200 million now, that will last them about three to six months; and after that we will definitely have FDI (approval for foreign direct investment),” said Sharan Lillaney, an aviation analyst at Angel Broking.

However, foreign carriers have shown little interest so far in investing in the Indian airline sector, which has grown by 17 per cent in 2011 but intense competition has driven five out of six local carriers to massive losses.

Indian carriers are on course to post cumulative losses of up to US$3 billlion for financial 2011/12, CAPA estimates.

“I don’t think FDI is the answer to all the problems. Indian carriers need to resolve the fundamental issues of excess capacity, high cost structures and unviable pricing strategies,” said Kapil Arora, a partner with Ernst & Young.

 

DREAMS TURN SOUR

After India embraced economic reforms two decades ago, a slew of private carriers rose in the Indian skies and then ran into the ground.

Modiluft, East West, NEPC Airlines and several others shut down operations within a few years of their launch for reasons ranging from inability to manage cost to funding concerns.

Mallya, who had so far run a very successful liquor empire – turning it into the world’s second-largest by volume through acquisitions – probably chose to ignore past lessons.

He took pride in getting a five-star rating for his airline, making it the first Indian carrier to provide passengers with a personal video screen, offered a superior level of service and even hand-picked air hostesses himself.

For Mallya, who owns several yachts as well as cricket and Formula One teams, an airline was an extension of his persona.

“For sure, there was ego and vanity at play because even when he started the airline it was not a secret worldwide that the airline business doesn’t bring in easy money,” said Santosh Desai, a brand strategist and columnist.

In a rush to expand, Mallya acquired Air Deccan in 2007 for US$220 million, a deal that saved the tottering low-cost carrier but over-leveraged Kingfisher.

Soon after, a global downturn hit Indian carriers hard, choking access to the equity market. Most airlines survived the crisis, but a debt mountain built up at Kingfisher and the top carrier, Jet Airways. Equity markets recovered, but Kingfisher failed to raise fresh funds.

This, along with operational losses partly due to high fuel costs – Kingfisher has never reported a profit – were crippling.

Questions have also been raised about its business model.

“India is a very price-sensitive market. In transportation, it is a volumes game; many of the frills do not matter in a short two-hour flight,” said Amber Dubey, director of aviation at global consultancy firm KPMG.

“What passengers really want is on-time performance (OTP), clean and safe aircraft, efficient service and low fares.”

Kingfisher now flies only 175 daily flights from a peak of 400 six months ago, with only 28 of its fleet of 64 operational. Lessors have started cancelling leases for planes, and the aircraft Kingfisher owns are mostly pledged with lenders.

An uncertain future and delayed salaries have driven away about 300 pilots and a few hundred other staff to rivals.

The carrier is also losing prime slots at key airports, which, along with a staff crunch, may prevent a quick return to normal operations even if it does survive this debt tsunami.

About nine-tenths of Mallya’s 58.61 per cent stake in Kingfisher is pledged. Even the brand ‘Kingfisher’ has been used as collateral, according to media reports.

The company is now seeking to restructure its US$1.3 billion debt, which may force lenders to take a writedown, extend fresh loans and make Mallya plough in fresh equity.

This has been in the works for six months, however, and it is unlikely an agreement can be reached in a hurry.

In a deal done early last year, lenders converted debt into a stake of just over 23 per cent in the carrier at about 65 rupees a share. But the stock has lost about 60 per cent since the beginning of 2011, closing down 4.35 per cent at 24.20 rupees on Friday.

 

THE FALLOUT

Kingfisher’s end, if it happens, would be the biggest failure in Indian aviation history and would impact the sector in the short term.

“If you see such a substantial number of seats being removed from the market suddenly, it will have a very adverse impact on the fares,” said E.K. Bharat Bhushan, chief of India’s aviation regulator.

A collapse could also lead to thousands of job cuts and the withdrawal of flights on some loss-making routes that Kingfisher flies exclusively or shares with state-run Air India.

Kingfisher’s market share in domestic skies, which has halved to about one-tenth in recent months, will get divided among rivals, with the low-cost carriers benefitting most.

Ever since Air India and Kingfisher flew into turbulence, budget carriers’ market shares have increased dramatically.

If Mallya can keep moving levers in Delhi, as he has in the past, Kingfisher could remain more than a brand of beer. If he falters and the government withdraws the life support, Kingfisher could run into the ground quickly.

The failure would also dent Mallya’s image, crafted through the years with massive display of wealth, wine and women.

“Mallya represented the extreme of an exuberance that India has seen lately,” said Santosh Desai. “But business cycles can be cruel and those traditional values of caution and prudence take precedence over unfettered ambition.” – Reuters

Source: http://www.themalays...ian-government/

Edited February 26, 2012 by JuliusWong

[Waiping 12]

Usually when come to this stage the next option would be to merge?

[alberttky 0]

I wonder what's gonna happen to the A380s they ordered...

[alberttky 0]

Kingfisher’s Mallya ‘working tirelessly’ to find new funding

 

 

Kingfisher Airlines (IT) founder and chairman Vijay Mallya told employees Monday that he hopes to conclude negotiations by next week with investors/lenders who could provide much-needed new funding to the strapped carrier, which reportedly has grounded more than 75% of its fleet.

 

In a letter to IT workers quoted by The Times of India, Mallya called the media’s reporting of IT’s financial crisis "unscrupulous" and "sensationalist."

 

But he conceded that IT employees, who have not been paid since December, are "seriously overdue" to receive salaries and assured that he has "organized funding" to make payroll. He called the inability to pay workers “a source of great personal sorrow for me.” The Indian government has ruled out a bailout of IT.

 

Mallya said that IT is “currently handicapped as our bank accounts are frozen by the tax authorities ... I have been working tirelessly to urgently resolve this issue through negotiation and I hope that these efforts will be successful early next week. We fully intend to pay our tax dues as much as we commit to paying your salaries.”

 

Mallya said IT would get a boost from a plan, announced in January by the Indian civil aviation ministry, to allow foreign airlines to own up to 49% of Indian carriers. He encouraged the Indian government to make a "positive move" soon to formally ease foreign airline investment restrictions.

 

http://atwonline.com/airline-finance-data/news/kingfisher-s-mallya-working-tirelessly-find-new-funding-0227

[alberttky 0]

Kingfisher owes Bank of Scotland $21.6m: UK High Court

 

 

 

Kingfisher Airlines owes Bank of Scotland $21.6 million in overdue lease payments for 10 ATR 72-500s, the UK High Court has ruled.

 

Bank of Scotland had brought the action on behalf of a consortium of lenders against Kingfisher's parent company, United Breweries Holdings, which had guaranteed the airline's obligations.

 

In his 13 January judgement, Mr Justice Eder said: "I am satisfied that the amounts claimed are due and owing and that therefore in those circumstances the claimants are entitled to summary judgment in the sum claimed, that is $21,589,972.56."

 

He said he saw "no other good reason" why the matter should not proceed to trial. The judgement paves the way for a potential action in India, or elsewhere, as it enables Bank of Scotland to pursue United Breweries Holdings' assets to recover the outstanding sum.

 

Dependent on the location of those assets, interaction with the local jurisdiction may well be required.

 

Bank of Scotland, as the security trustee for a group of syndicated lenders, funded KF Turbo Leasing, a special purpose vehicle incorporated in the Cayman Islands that purchased the ATR aircraft.

 

Each aircraft was leased then by KF Turbo leasing, for a term of ten years beginning on the delivery of that aircraft, to Kingfisher, according to UK documents.

 

Both parties entered into the agreement on 29 March, 2007.

 

http://www.flightglo...h-court-369048/

Edited March 3, 2012 by alberttky

[Johan Z 0]

I wonder what's gonna happen to the A380s they ordered...

Just like what happened to A340-500

[JuliusWong 0]

This airline has death sentence written all over.....wonder how long it would last?? Most of their A320s has been repossessed.....If RBS starts to repossess their ATR 72, KF is dead.....

[alberttky 0]

Kingfisher appeals to pilots to show up for work

 

 

 

 

 

Ailing Indian carrier Kingfisher Airlines is appealing to its pilots to show up for work and to the tax authorities to unfreeze its bank accounts as speculation about its possible shutdown continues.

 

The country's tax department froze the airline's bank accounts for the fourth time last week, after it failed to make outstanding payments on 29 February.

 

"We are trying our best to cooperate with the tax authorities and get our accounts unfrozen at the earliest so that normalcy could be restored, employee salaries paid and further aircraft recoveries started," said the airline's vice-president of corporate communications, Prakash Mirpuri.

 

He added that chief executive Sanjay Aggarwal met with some pilots to "appeal to them not to stay away from flying duties" to avoid potentially affecting the airline's operating schedule.

 

However, the Indian media reported that Aggarwal met with the pilots on 1 March, could not commit on when the salaries will be paid and even threatened a shutdown when the pilots said they may not fly unless they are paid.

 

The media reports added that civil aviation minister Ajit Singh said should the directorate general of civil aviation be concerned with the airline's inability to pay its staff affecting safety, Kingfisher's operating licence could be temporarily suspended.

 

"At no time was there any suggestion that Kingfisher Airlines wouldshut down," Mirpuri said.

 

"Our flights are operating as per schedule and we truly appreciate the continued dedication and commitment of all staff to our valued guests."

 

The cash-strapped carrier has grounded about a third of its fleet of 68 aircraft. It earlier said bird strikes rendered the aircraft out of service, but later changed stance, saying that their frozen bank accounts meant they were unable to make any operational payments.

 

Last week, Flightglobal Pro reported the UK High Court's ruling that the airline owes the Bank of Scotland $21.6 million in overdue lease payments for 10 ATR 72-500s.

 

http://www.flightglobal.com/news/articles/kingfisher-appeals-to-pilots-to-show-up-for-work-369079/

[jahur 0]

This is worse than i thought.

[Josh T 0]

I don't see how Kingfisher can survive this. It brings back memories of when Ansett went down...

[BC Tam 2]

7 March 2012 Last updated at 15:28 GMT

Kingfisher Airlines suspended by Iata over unpaid debts

 

India's Kingfisher Airlines has been suspended by the International Air Transport Association's (Iata) from using its clearing house.

It is used to divide income between airlines, including multi-leg journeys.

The suspension, for failure to pay its bills, means Kingfisher will have to make direct deals with other airlines in order to share journeys.

The loss-making airline has struggled to run a full schedule of flights as it urgently seeks additional investment.

Japan Airlines has also canceled an agreement to allow its customers to book part of their journey with Kingfisher.

Kingfisher said its suspension by Iata would not affect its customers.

"Kingfisher Airlines continues to operate 200 flights to 46 domestic and international destinations. The ICH suspension does not impact our guests travelling on any Kingfisher Airlines flight or our flight schedules," it said in a statement.

Losses

However, the Reuters news agency has reported that Kingfisher is currently using just 28 of its 68 planes, due to funding difficulties.

In February Kingfisher reported a 75% increase in its losses to 4.44bn rupees ($90m; £57m) between October and December 2011, compared with 2.54bn rupees a year earlier.

The carrier has failed to make a profit since it was founded in 2005 by Indian beer entrepreneur Vijay Mallya.

Recently it has struggled with rising oil prices and debts of around $1.3bn. It is reportedly seeking $400m in investment.

"The future doesn't look bright," said airline analyst John Strickland.

"I would expect to see Kingfisher... to reduce its scale of operation, possibly more than it's had to do so. It's struggling to survive in a highly competitive and price-sensitive market."

 

http://www.bbc.co.uk...siness-17283571

[alberttky 0]

Kingfisher working with tax authorities to lift IATA suspension

 

Struggling Kingfisher Airlines is in talks with the Indian tax authorities to free up cash to settle the outstanding payments which have prompted IATA to suspend the carrier's participation in its Clearing House payment system.

 

IATA today suspended the airline's participation in the payment system for the second time in a month after Kingfisher failed to settle its Clearing House account on time. The airline had previously been reinstated after its was temporarily suspended from the Clearing House in February.

 

"Due to the accounts getting attached by the tax authorities, we were not able to make a payment to IATA Clearing House which resulted in a temporary suspension," the airline says. "We are working with the tax authorities and expect the accounts to be unattached shortly. As soon as this is done, we will pay our dues to IATA and get reinstated."

 

India's tax department froze the airline's bank accounts for the fourth time recently, after it failed to make outstanding payments on 29 February.

 

The airline says it continues to operate 200 flights to 46 destinations and adds the Clearing House suspension "does not impact our guests travelling on any Kingfisher Airlines flight or our flight schedules".

 

http://www.flightglo...pension-369219/

Edited March 8, 2012 by alberttky

[JuliusWong 0]

Kingfisher cancels international routes

 

Published: 14/03/2012

 

Kingfisher Airlines confirms it will drop international routes and that investment from a foreign airline is on the horizon.

 

In a statement, the carrier announced: “We are curtailing our wide-body overseas operations that are bleeding heavily. To this end we have already returned one Airbus A330-200 to its lessor in the UK. Positive and immediate action is being taken on all fronts to cut costs.” Kingfisher did not specify which destinations would be dropped or when these cuts would happen in their statement.

 

However, according to industry website airlineroute.net, the carrier’s GDS system shows that some flights have already ceased to operate. So far, the carrier has already stopped operating flights from Delhi to London Heathrow (as was predicted here earlier), from Mumbai to Singapore and from Mumbai to Hong Kong. On March 15, the carrier will cease its five weekly services between Delhi and Hong Kong.

 

Then, on March 25, Kingfisher will stop operating daily service from Delhi to Bangkok, Dubai, Hong Kong and Kathmandu; from Mumbai to Bangkok and Dubai; from Bangalore to Dubai; and from Chennai to Colombo. Finally, on April 10, the carrier will no longer operate the Mumbai-London route.

 

In an official statement, which bemoans the wide “sensational speculation and assumptions” about the airline's troubles, Kingfisher confirmed “there is an interest from perspectives” in terms of possible foreign capital coming in, but it will have to stay within the existing Foreign Direct Investment (FDI) limit of 49 per cent and be subject to regulatory approval.

 

For more information, visit www.flykingfisher.com

 

Source: http://www.businesstraveller.asia/asia-pacific/news/kingfisher-cancels-international-routes

 

Statement From Kingfisher Airlines - Mumbai, March 14, 2012

1. Despite the shortage of crew, Kingfisher Airlines operated 101 flights on March 13th and will operate 101 flights on March 14th.
   
2. Our prime mission is to maintain schedule integrity by predicting in advance what we can with the sole objective of minimising, if not eliminating guest inconvenience.
   
3. We try hard 24X7 to inform guests in advance of cancelled or combined flights and to give them the option of travelling on other airlines or to take a full refund.
   
4. There will, inevitably, be a small number of guests who are inconvenienced partially because we could not access them personally but only via their agents.
   
5. Kingfisher apologises to all those who were affected.
   
6. Whilst many of our pilots and engineers have expressed their disappointment, we not only sincerely apologise to them but wish to advise that our Chairman will meet the pilot fraternity on Thursday March 15 in Delhi.
   
7. There is a lot of sensational speculation and assumption about us.
   
8. We request one and all to appreciate the serious handicaps we face not only because of our frozen accounts but because of the operating environment. We are working hard to resolve the issues that confront us given the current environment.
   
9. We would like to confirm that we are curtailing our wide body overseas operations that are bleeding heavily. To this end we have already returned one Airbus A 330-200 to the lessor in the UK. Positive and immediate action is being taken on all fronts to cut costs.
   
10. We are trying to protect the interests of our valuable employees. We share their pain caused by unpaid salaries and we are also trying to protect their jobs apart from paying salaries.
    
11. Whatever the schedule we operate, we would like to assure our valued customers that your flights will depart as shown and on time.
    
12. The suspension of our ICH and BSP accounts with IATA resulted from the freeze of our IATA accounts by the tax authorities.
    
13. We have, obviously suffered as guests are not able to book seamlessly through IATA travel agents as before. This serious handicap has been partially mitigated by encouraging our travel partners to establish booking arrangements on their individual platforms. Nevertheless, this greatly influences our ability to operate certain flights and it is, therefore, incorrect to assume that pilots are solely responsible.
    
14. We continue to work with the tax authorities to arrive at a solution to de-freeze our accounts as early as possible.
    
15. We are also working with our Bankers to realise the urgent interim working capital as approved in the Bankers Consortium meeting held on February 17th. This is not dependant on State Bank of India as widely reported.
    
16. We fully understand that State Bank of India can only consider additional facilities once our account with them is standard and this has been debated and minuted at the last Consortium meeting.
    
17. The Government's final verdict on removing the restriction on investment by a foreign airline within the existing FDI limit of 49% is awaited. We can confirm that there is interest from prospectives on this basis.
    
18. Finally, we wish to assure all guests, employees and all stakeholders that we are doing our very best.
    

Prakash Mirpuri

Vice President - Corporate Communications

Kingfisher Airlines Ltd.

 

Source: http://www.flykingfisher.com/media-center/press-releases/statement-from-kingfisher-airlines.aspx

[JuliusWong 0]

Kingfisher Recovery Plan "In 2-3 Days"

 

March 15, 2012- India's cash-strapped Kingfisher Airlines will have a full recovery plan in place in 2-3 days that will address its financial issues and restore dozens of flights, its chairman said on Thursday.

 

Kingfisher, controlled by flamboyant drinks baron Vijay Mallya, has almost halved its daily flights from the scheduled 200 after several pilots refused to report to work and a suspension by global industry body IATA from its settlement system restricted bookings through overseas agents.

 

The carrier, which has debt of USD$1.3 billion, is facing near collapse as banks have so far refused to lend it more for day-to-day operation and massive cutback in flights have reduced revenues, leaving the carrier with little cash to pay its employees, airports and tax authorities.

 

"In 2-3 days time you'll hear the full plan," Mallya said on a query on financial restructuring of the company at a press conference after he met about 80 pilots to assuage their fears on delayed salaries. Scores of pilots have resigned from Kingfisher in the past six months.

 

"I have their (pilots) assurances that certainty of the schedule will be maintained," Mallya said, without elaborating on when pilots' salaries will be paid.

One foreign airline and two non-airline foreign investors are interested in buying stake in the Indian carrier, Mallya said. The Indian government is considering allowing foreign airlines to buy stake in Indian carriers and a decision could be announced soon.

 

Kingfisher needs at least USD$500 million immediately to keep flying and USD$800 million to return to full operations, according to the Centre for Asia-Pacific Aviation (CAPA), an industry consultancy.

 

Kingfisher's troubles have become representative of India's airline industry that is struggling with high fuel costs, cut-throat competition and low fares.

Five of India's six airlines are in the red and all local carriers together are likely to lose USD$2.5 billion in the fiscal year ending March, according to CAPA. (Reuters)

 

Source: http://news.airwise.com/story/view/1331851319.html

Edited March 16, 2012 by JuliusWong

[jahur 0]

Just noticed Kingfisher's Star Rating has been already suspended from Skytrax.

[JuliusWong 0]

Kingfisher To Start Paying January Wages

 

May 8, 2012

 

India's Kingfisher Airlines will start paying January salaries starting from Wednesday, Chairman Vijay Mallya wrote in a letter to employees, as the debt-laden carrier struggles to retain staff.

 

"It is my personal endeavour to not only clear the January salary but also clear a significant part of the February salary by the end of this month itself," Mallya wrote in the letter.

 

The airlines also expects to re-enter a distribution network with the International Air Transport Association "very shortly," Mallya said.

(Reuters)

 

Source: http://news.airwise....1336438931.html

Edited May 8, 2012 by JuliusWong