Don’t write epitaph for Kingfisher: Vijay Mallya

Agencies

Mumbai, 15 November 2011: The ‘King of Good Times’ Vijay Mallya took control of Kingfisher Airlines’ ‘cockpit’ on Tuesday and spelt out the plan to get the airline out of turbulence.

 

Addressing a press conference here after two days of deliberation by the airlines’ board on the way forward in view of reports that the airline was close to being shut, Mallya said that the reports are baseless and advised the media to not write the epitaph of the airline.

 

“To write the epitaph of Kingfisher Airlines constantly…It is neither fair nor accurate,” he said.

 

Never asked for bailout

 

Mallya made it clear that his Kingfisher has never asked for a bailout from the government.

 

“I have not asked the banks or the government for any bailout. I am very grateful to the Prime Minister, who said that government would have to find solutions to the problems being faced by Kingfisher Airlines.”

 

“While thanking the PM for his support, I want to clarify, we have never done that (ask for bail out) and we will never do that,’ he said.

 

Blaming the high taxes being imposed by state governments on Aviation Turbine Fuel (ATF), he said that today fuel comprises of as much as 50% of the operating cost of the airline. He pointed out that while state governments are making windfall profits, the airlines are bleeding.

 

The flamboyant boss of the airline said the only reason they approached the banks was to get more working capital given the challenging business environment prevailing today.

 

“Given the huge increase in fuel cost, we have a genuine need for working capital increase. That is what we asked the bank for. I want to clarify this once for and all we have asked for additional working capital,” He said.

 

The clarification is important as it comes amid reports that the bleeding airline is close to bankruptcy and had approached banks for recapitalisation.

 

He also made it clear that the debt burden on the airline is not “enormous” and that Kingfisher is confident of repaying it back on time, adding that his airlines not worse off than other players.

 

‘Every carrier is losing money, there are systemic issue,” he said.

 

Incidentally, the airline had reported a loss of over Rs 450 crore in Q2 results announced earlier today.

 

Oil crunch

 

On the reports that state-owned oil marketing companies (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have refused any further credit to the airline, Mallya said, “There was a time in the last 18 months when Kingfisher enjoyed over Rs 1000 crores of unsecured credit by three oil marketing companies. We have repaid Indian Oil and Bharat Petroleum in full, we don’t owe them a single paisa, as far as HPCL as concerned, of the over Rs 600 crores of unsecured credit it is now down to Rs 40 crores.”

 

Mallya said the “problems” are not always from the airlines side and that Kingfisher has approached the government for direct import of ATF to avoid the high tax on it.

 

Cancelled flights

 

On the issue of cancelled flights in the past week, Mallya said, “We cancelled flights not because we couldn’t afford to fly; even today Kingfisher is flying… the cancelation of 50 odds flights have been blamed on entirely wrong reasons.”

 

“We may be wrong at times but it was a commercially prudent decision. We cannot fly on routes that are heavily loss making.
 We are not in the same arena as the Air India, which perhaps has a national duty to perform as government is a stakeholder.”

 

“We are accountable to the banks and shareholders but we are acutely conscious of the need for connectivity in India and Kingfisher has the widest network. There are destinations to which we fly exclusively. We haven’t dropped any one of these routes because we are conscious of that that irrespective of profit or loss connectivity has to be maintained.”

 

Way forward

 

On the way forward, Mallya said that the focus is on ways to increase the yield.

 

“We have taken up reconfiguration of our aircraft which will give us incremental revenues. We decided to phase out Kingfisher Red; unfortunately it was misconstrued as to we shutting down a part of the airline,” he said.

 

“Our yields in the Kingfisher Class were much higher than what we were getting from the no frills calls and we are getting more on yield than what we were spending on provinding full service,” he pointed out.

 

On the future of civil aviation sector in India, he said, “Yes there is huge civil aviation growth forecast, ours is vast country and air connectivity is the only solution. Air traffic is not restricted to metros anymore, the future is bright but you need to look at which end of the pyramid you would want to focus on.”

 

He quipped that there is now lost model in India as the only differentiator between low cost airline and full service airline is only the frills like onboard meals.

 

“I will never say low cost for low fare, only differentiator is the meal, lounge access and frequent flyer programme. With this huge capacity at the low end of the pyramid, there is going to be a bloodbath and we don’t want any of the bloodbath,” he said.

 

Mallya added that as the economy grows businessmen will fly and Kingfisher would like to focus on that customer.

 

“That segment is willing to paying extra for the convenience. There are only three full service carriers, Kingfisher, Jet and Air India…more tempered competition and not the cut throat competition that is at the bottom end of the market,” he added.