MALLYA DENIES SHUT DOWN AND LAYOFFS

At a press conference held last month in Mumbai, Vijay Mallya, Chairman and Managing Director, UB Group, denied speculation that Kingfisher Airlines would be shutting down. Mallya said, “We cancelled some of our flights because we could not afford to fly on unprofitable routes. It was a commercially prudent decision. We also took the decision to phase out Kingfisher Red because we were seeing better yields on the full service Kingfisher Class.” The airline has suffered losses of Rs 469 crore in Q2 FY 2011-12, which is a -29 per cent margin compared to a loss of Rs 231 crore and a -15.3 percent margin in the same quarter last year. Elaborating on the results, Mallya said, “The current environment is high-cost and high-risk. It is very challenging. We have a genuine need of working capital at the moment and we have approached banks for these facilities. Kingfisher Airlines has not approached the government for a bailout. We have not asked the government to dip into its coffers or into the taxpayers’ money. We have never done such a thing and we will never do it.” According to Sanjay Aggarwal, CEO, Kingfisher Airlines has undertaken several projects to improve operational performances such as discussing various ideas with banks to reduce interest costs without further restructuring; addition of more seats to improve revenue production ability by eight percent; dropping unprofitable flights and reducing distribution and general and administrative expenses. Aggarwal further added, “The airline in the last six quarters on the basis of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Kingfisher Airlines has outperformed other airlines five out of six times. Kingfisher Airlines has a load factor of 77 percent compared to the industry load factor of 72 percent and total revenue of Rs 1,630 crore, which is an improvement of eight percent over the same quarter in 2010.” Mallya stated, “We have not asked the banks for a concession. Our demands with the banks are two-fold; one is that they meet short-term working capital needs and in the long-term, reduce interest rates.” Mallya also said that Kingfisher Airlines has applied to the Directorate General of Foreign Trade (DGFT) for direct import of fuel in order to reduce fuel costs, “We have officially applied to the DGFT for direct import of fuel to avoid sales taxes. Airlines all over the world are struggling with fuel costs, but in India, the problem is compounded with the addition of sales tax on fuel. Note: At the time of going to press it was reported that Kingfisher Airlines is in talks with a potential domestic investor. The airlines claimed that it needed fresh capital of upto Rs. 800 crores.