Financially troubled Kingfisher Airlines Ltd is due to submit a recovery plan to the aviation regulator by end-March so it can continue flying, according to a Livemint.com report.
This plan reportedly entails a further cutting of international operations, pulling out of all loss-making routes, renegotiating high-cost aircraft lease rentals, tapping foreign loans for working capital and getting back its US$40 million deposit from the International Air Transport Association (IATA).
IATA has suspended Kingfisher for the second time in two months from the IATA clearing house (ICH) system for defaulting on payments. “Mallya had met IATA director general and chief executive officer Tony Tyler to discuss the issues. If IATA agrees, it will help the airline give salaries in a phased manner,” the reports quoted an unnamed executive at the carrier as saying. Kingfisher plans to disburse salaries in a phased manner to its employees, who have not been paid since December.
The regulator has issued a showcause notice to the airline asking
why it should be allowed to continue operations. DGCA can initiate tough measures against the airline if it fails to convince the regulator about its potential for recovery, since the cash crunch can affect flight safety.
“Ha l f-a-dozen management representatives met promoter Vijay
Mallya on Friday to chart out a realistic recovery plan,” the airline executive said. “Mallya would meet DGCA E.K. Bharat Bhushan on Monday.” The meeting is crucial for Kingfisher Airlines as it has
failed to convince the director general of civil aviation (DGCA) of its ability to meet regulatory requirements in running its fleet.
Kingfisher Airlines, which has not made a profit since its inception in 2005, has been cancelling flights since 17 February because of a severe cash crunch. It is operating about 100 flights a day out of its latest revised schedule of 175. A year ago, the airline used to
fly 340 flights a day.
The airline, which has a debt of about US$1.3 billion, needs at least $400 million to keep flying, according to the Centre for Asia Pacific Aviation. Kingfisher last month also delayed joining the global airlines’ grouping ‘oneworld’ due to its precarious financial position. It had been slated to formally join the airline alliance on 10 February.
Kingfisher’s owner, billionaire liquor tycoon, Vijay Mallya owns one of the world’s most expensive yachts, a cricket and Formula One team, is known as the ‘King of the Good Times’ for his high flying lifestyle.
Indian airlines are likely to post a combined loss of a $2.5 billion in
2011-12, worse than the $2 billion loss of 2008-09, when traffic was declining and crude prices had spiked to $150 a barrel, consulting firm Centre for Asia Pacific Aviation estimated in a February
report. Jet fuel accounts for 45 per cent of an airline’s operations cost.
