Kingfisher to Rely on Own Funds to Restore Operations

Tuesday, 30th October 2012 at 01:06am

Kingfisher Airlines will have to rely on its own strength to redeem itself from financial mess as it successfully persuaded its striking employees to return to work, according to the Directorate General of Civil Aviation (DGCA) on Friday. The cash-strapped airline is planning to salvage what is left in its coffer to resume operations.

According to the aviation regulator, however, the beleaguered carrier needs to seek approval from airport operators as well as jet oil companies about its plan to operate again as the airline has been delinquent in its past payment obligations.

Moreover, the regulator is tasked to consult the stakeholders before taking action on granting back its license to fly which was suspended last October 5.

Top officials from the airline are expected to discuss its rehabilitation plan very soon with the UB Group chief and Vijay Mallya.

Meanwhile, the DGCA advised the airline to prepare and submit to them their winter schedule, based on the remaining aircraft in its fleet.

The carrier has a current fleet of 10 Airbus A320 and 3 ATR turboprops and a possible one more plane coming anytime soon.

Kingfisher has ceased all its operations since October 1 after the protest turned ugly.

Four days later, the DGCA suspended its license to fly for safety reasons after learning that the troubled airline has ran out of cash.

Since it started operations, the airline has accumulated a loss of more than Rs 8,000 crore and burdened with a debt of more than Rs7,500 crore.

Kingfisher was then India's second largest airline before it went through its worst financial crisis last year, causing it to ground almost 80 percent of its aircraft. From 66 planes, it now has 13 aircraft in its fleet, 10 of which are A320s, 3 are turboprops.

The airline is hoping to get fresh capital from foreign investors after the Indian government recently approved a new policy allowing foreign airlines to acquire up to 49% stakes in any local airlines. Unfortunately, however, no foreign airline is taking the bait.

Chairman Mallya is also trying very hard to save the airline and is seeking fresh funds from many sources including the possibility of selling stakes in his own United Spirits Ltd, his flagship company, currently the world's third largest. In fact, he is in talks with the world's largest producer of spirits, Diageo Plc of London for this purpose.

Kingfisher Airlines has never been profitable since it was founded in 2005. In fact, according to the consultancy group, Centre for Asia Pacific Aviation, its total debt hovers around $2.5B.

The shares of the embattled airline surprisingly showed an encouraging movement on Thursday as it rose 4.61%.

By: Pete Lee.