Kingfisher Cuts 13% of Flights on India Aircraft Disruptions - BusinessWeek

February 20, 2012, 12:05 AM EST By Karthikeyan Sundaram and Malavika Sharma

(Updates with analyst’s comment in fourth paragraph.)

Feb. 20 (Bloomberg) -- Kingfisher Airlines Ltd., the Indian carrier seeking new funds after losses, cut about 13 percent of flights after bird strikes and other “unexpected events” forced airplanes out of service.

As many as 32 daily flights were canceled starting Feb. 17, the Bangalore-based company said in a Feb. 18 e-mailed statement. The carrier, controlled by billionaire Vijay Mallya, plans to resume its full schedule of 240 flights a day this week, it said.

Kingfisher denied closing any operations permanently in a bid to reassure customers about its long-term viability after posting more than 10 straight quarterly losses, having accounts frozen by tax authorities and cutting flights last year. The groundings following damage to engines after they sucked in birds may also reflect a shortage of powerplants cited by the aviation regulator last month.

“If you’ve got a spare engine that’s a one-to-two day problem,” said Neil Hansford, chairman of Strategic Aviation Solutions, an adviser to airlines based in Port Stephens, Australia. Cutting flights may also cause costs as the carrier will have to find other flights for passengers or refund them, he said.

The Directorate General of Civil Aviation has started an inquiry into the Kingfisher cancellations, the Times of India reported on its website, citing sources it didn’t name. The directorate wanted a report by the end of yesterday, it said. A call to the office of Director General E.K. Bharat Bhushan today, a national holiday, wasn’t answered.

The airline said “unexpected events” were the cause of the cancellations. Suggestions it is cutting its schedule permanently “are ill-founded,” it said.

The airline is also confident it will be able to resolve a tax dispute and regain access to accounts, it said.

Industry Losses

Kingfisher, Jet Airways (India) Ltd., the nation’s biggest carrier, and discount airline SpiceJet Ltd. all posted third- quarter losses as higher jet fuel costs and price wars eroded gains from rising travel. Kingfisher’s loss in the quarter ended Dec. 31 widened to 4.44 billion rupees ($90 million) from 2.54 billion rupees.

The airline has plunged 39 percent in the past year in Mumbai trading. It dropped 1.3 percent to 26.65 rupees on Feb. 17. Markets are closed today because of a holiday.

Kingfisher is seeking new investment as it struggles under $1.3 billion of debt. The carrier has also met with banks and requested additional working capital, it said.

“New investors in Kingfisher haven’t yet materialized,” said Binit Somaia, a Sydney-based director at CAPA Centre for Aviation, an industry consultant. “A serious investor would only enter after having carefully understood the risks associated with the transaction.”

Order Canceled

The airline, which fell to fifth in the Indian market in December from second in October, has grounded 12 of its existing 27 Avions de Transport Regional planes and delayed Airbus SAS A380 deliveries beyond 2016. ATR, a maker of turboprop aircraft, said last month it canceled a 38-plane order from Kingfisher after the carrier missed payments.

The airline has pledged its brand, office furniture and other assets against a debt of about $1.3 billion. Kingfisher said Jan. 19 it’s in talks with potential investors including SC Lowy Financial Services.

India may soon let airlines import jet kerosene directly to save on local sales taxes as high as 30 percent, the Civil Aviation Ministry said in a Feb. 16 statement.

In November, chiefs of Indian carriers met Prime Minister Manmohan Singh as they sought government assistance to stem industry losses. The nation’s airlines will probably lose $2.5 billion in the year ending March, according to CAPA.

Kingfisher had a fleet of 64 planes ranging from ATR turboprops to Airbus A330s as of Dec. 31, according to a Feb. 15 company statement.

--With assistance from David Fickling in Sydney and Kartik Goyal in New Delhi. Editors: Neil Denslow, Dave McCombs

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Malavika Sharma in New Delhi at msharma52@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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