There does not seem to be any end to Kingfisher Airlines’ woes.
Last week, a section of its staff members again went on strike, protesting against non-payment of salaries from February this year. On the first two days of the current strike, the airline cancelled about 50 of the 200 flights that it would have operated on both days combined.
Worse, the airline also wrote to the authorities saying that seven ATR and three Airbus aircraft from its fleet would now be non-operational. This means the airline is not operating 10 of the 16 aircraft in its fleet. Authorities claimed that the airline had not told them when it would start operating these aircraft.
Little wonder then that currently the airline is finding it difficult to operate even 100 flights a day. Result: it is now carrying only about 9,000 passengers.
Losses mount
The downsizing of operations and reduction in the number of aircraft in its fleet are all telling on the financials. The airline reported a loss of Rs 651 crore for the quarter ending June 30, from Rs 264 crore a year ago.
This when the two other publicly-listed companies, the low-cost SpiceJet and Jet Airways, reported profits in the quarter ending June 30. Both the companies went from being in the red to black.
Of course, Kingfisher has faced financial problems from the very start. It has not made any profits since it started operations in 2005 and the situation has only become worse, with the result that today it owes banks over Rs 6,500 crore.
The airline has also been defaulting on money that it owes to a number of service providers. Today, Kingfisher is paying only about Rs 50 lakhs a day to various GMR entities as landing, parking and other fees for using airport facilities — down from an amount running into several crores till recently. Ditto for the Airports Authority of India (AAI), which now receives about Rs 1 crore a day while its accumulated outstanding amount from the airline stands at Rs 250 crore.
Hits one and all
The impact of Kingfisher’s downfall has been felt not just by passengers but also other players like airports, travel agencies, oil companies and leasing companies.
According to Pratik Mazumdar, Head of Marketing and Strategic Alliance,Yatra.com, earlier this year, Kingfisher had the largest operations in the country with a fleet of 60 aircraft but now it is down to about 15 per cent of its capacity.
Kingfisher’s market share dipped to 4.2 per cent in June this year from a high of 20.2 per cent in May 2011.
All this means is that flyers have to pay more for flying in domestic skies, even on an airline of their choosing. Kingfisher’s withdrawal of a large chunk of its seats means the domestic air fares are headed northwards.
“Since the supply has gone down, fares have gone up by about 40 per cent,” Mazumdar told Business Line .
Domino effect
Besides other airlines higher tariffs, there is a dichotomy between the fares being charged by other airlines and Kingfisher. Take the crowded Delhi-Mumbai sector for example.
Between November last year and now a one-way ticket on Kingfisher has been hovering around Rs 7,200 to Rs 7,800. This, industry watchers say, is about 20-25 per cent lower than what other players in the market are charging.
“Kingfisher fares should also have moved up as all airlines have hiked fares three times to offset input costs, like increase in airport charges and surge in aviation turbine fuel. Not increasing fares also distorts the market,” a senior official of a competing airline said.
Kingfisher’s precarious financial position has resulted in collateral damage for other players wanting to lease aircraft. Many of Kingfisher’s aircraft, which were on lease, have been repossessed by international leasing companies.
This experience of repossessing aircraft is forcing leasing companies to re-evaluate the Indian market. Analysts, however, argue that it will be unfair to blame Kingfisher for this as the attitude has more to do with the Indian aviation environment.
At the moment, there seems to be no silver lining for Kingfisher, except for foreign direct investment (FDI) being allowed in the Indian domestic aviation sector. The airline has said time and again that there are a number of international buyers interested in buying a stake in Kingfisher.
But with the Government yet to take a stand on allowing FDI, the domestic aviation sector has no choice but to learn to live with the existing situation.