Kingfisher crisis: Not shutting down, says Mallya

www.mangaloretoday.com

Mumbai, November 15, 2011: The debt-ridden Kingfisher Airlines has made it clear that it is not shutting down. On a day that India’s second-largest carrier posted a huge loss of Rs. 469 crore for the second quarter, Chairman Vijay Mallya, attempted to explain what ails his airlines and what his plans are to overcome deep debt and keep his company afloat.
 
Flanked by his top officials, he first sought to address all the speculation over the last few days, ever since a spate of flight cancellations have brought focus on the company’s deep financial crisis. And in some key messages, he said:

* To write the epitaph of Kingfisher airlines was not fair;
* Other airlines were making losses too; all airlines were operating in a tough environment, fuel costs were prohibitive;
* He had not asked the government or lender banks for a bailout;
* He thanked the Prime Minister for saying a solution should be found to Kingfisher’s crisis, saying that as an economist, Dr Manmohan Singh understood the importance of connectivity;
* He did not want the government to spend tax payers’ money to rescue his company;
* He needed an increase in working capital and reduction of interest cost burden;
* His company had paid back two oil marketing companies - Indian Oil and BPCL every rupee it owed them, and the unsecured guarantee with the third, HPCL, was down from Rs. 600 crore to Rs. 40 crore;
* There was no truth to reports that there would be an imminent stoppage of fuel supply and imminent grounding of Kingfisher flights, he said;
*Kingfisher would not sack any of its 7,000 employees, unlike some other airlines.

And he said that in all of this, he had not even thought about selling some of his substantial assets to tide over the present crisis. Such reports he said were "completely untrue." He did confirm, however, that he had been approached by an Indian group for stake in Kingfisher Airlines, but would not say who.
 
Mr Mallya said he would begin by making a presentation on the performance of his airline – to put facts right and in perspective. “We cancelled flights not because we could not afford to fly. The cancellation has been blamed on wrong reasons. It was only a commercially prudent decision. We cannot afford to fly on routes that are loss making,” he said.
 
Mr Mallya admitted that his carrier could have handled the cancellations better. Kingfisher has assured passengers that there will be no more cancellations.
 
The flamboyant industrialist talked about the phasing out of Kingfisher Red, the no-frills service, as a strategic decision of the company not to compete in the low-cost segment anymore. “Phasing out of Kingfisher Red doesn’t mean, we are shutting down….we have a loyal customer base, better yields on the full-service Kingfisher Class, so it’s a financially prudent decision to focus on that segment.”
 
Kingfisher, Mr Mallya said was taking several initiatives to try and keep spending efficient. Airlines, he said, were struggling with high fuel costs. "If we import fuel directly, then we don’t pay sales tax."

He also sought Foreign Direct Investment (FDI) in the aviation industry saying he did not see why it should not be permitted. Open the skies, he said, to global players in the industry looking to invest for aviation needed big investment and the industry was poised for big growth.
 
Mr Mallya has insisted all along that he has not sought a bailout. Today, he said he did not want the government to dip into its coffers of tax payers’ money to offer his airline a package, like it had done to the debt-ridden national carrier Air India.

What he needed was to raise working capital and to reduce interest cost burden. He said he was in talks with banks for that; he rubbished reports that he wanted his debt restructured. Mr Mallya said he had nine years to pay back his debts.
 
Lender banks, led by State Bank of India, have asked Kingfisher to raise fresh funds before they can help it and Mr Mallya said he would explore opportunity to do that.

The lenders were scheduled to meet in Bangalore today to discuss if additional funding can be provided to the airline, but that meeting will now be held later. SBI leads the consortium of 13 banks that have lent to the airline and the bank has the biggest exposure to the company at Rs. 1,400 crore.
 
SBI wants the carrier to raise at least Rs. 800-1,000 crore in equity before considering a second restructuring of existing debt or extend fresh advances. ICICI Bank, Punjab National Bank, Bank of Baroda and IDBI - other big lenders will be a part of the meeting.

United Spirits, promoted by Vijay Mallya, plunged 11 per cent on the Bombay Stock Exchange today. Most lenders to Kingfisher Airlines own shares of United Spirits as collateral. Among other companies promoted by Mr Mallya, United Breweries Holdings fell over 2.5 per cent while United Breweries and Kingfisher Airlines closed higher.

Mr Mallya’s long interaction with the Press today to clear the air came on the same day as the company posted its Q2 results, announcing a Rs. 469 crore loss, double than in the same period last year - it had a loss of Rs. 231 crore then. Kingfisher said in a statement that its net worth had been eroded on substantial losses and that yield continued to be under pressure due to high crude prices. Its average revenue per passenger is down 4 per cent year on year.
 
The Kingfisher board had met till late last night, inconclusively, to take stock of the mounting losses and chalk out possible ways to reduce its debt burden. The company has to bring down it’s over Rs. 7,000 crore debt that the carrier owes to a consortium of banks.

Courtesy: NDTV