Vijay Mallya, whose cash-strapped Kingfisher Airlines cancelled scores of flights this week, drawing the ire of the government and travellers and spooking investors, questioned on Saturday whether it was the carrier's duty to fly loss-making routes.
Shares in Kingfisher, the country's second-largest airline by market share, fell as much as 18 per cent to an all-time low on Friday as investors fretted about the viability of the carrier, which acknowledged it had been late in paying salaries in recent months.
On Saturday, the Mint newspaper, citing an unidentified source, reported that the government had decided in principle to allow foreign airlines to own up to 24 per cent of Indian carriers, a move that could throw a lifeline to Kingfisher and its struggling rivals.
It said the matter would be put before the cabinet of Prime Minister Manmohan Singh in the next four weeks.
Mallya, the flamboyant liquor tycoon who owns a cricket team and a Formula One racing team, asked on the social networking site Twitter whether it was Kingfisher's duty to fly loss-making routes while it was being heavily taxed by state governments.
Or should the airline be financially prudent and fly profitably, he asked.
Late on Friday, Kingfisher said it was dropping unprofitable routes and speeding up a fleet reconfiguration which would see its daily schedule of flights drop to 300 from 340. It recently said it was exiting the low-fare segment of the business.
The carrier, whose share price has dropped 70 per cent in 2011, bringing its market capitalisation below $200 million, also said on Friday it 'does not see any risk to its future or long-term viability'.
Aviation Minister Vayalar Ravi said he would approach the finance minister to seek emergency bank assistance for troubled airlines. Kingfisher said it had not sought a government bailout.
India's mostly loss-making airlines are struggling amid fierce competition and high sales taxes on aviation fuel despite passenger growth of about 19 per cent this year.
The Centre for Asia Pacific Aviation has forecast a record $2.5 billion to $3 billion loss for Indian airlines for the year ending March 2012, with state-run Air India alone likely to account for more than half of it.
On Friday, private carrier Jet Airways and budget airline SpiceJet reported losses for the September quarter, compared with profits in the year-earlier period. Kingfisher has never made a profit.
http://www.deccanchronicle.com
http://www.deccanchronicle.com
Factbox- India's loss-making airlines sector
Debt-laden Kingfisher Airlines on Friday continued to cut flights just as the country's travel season enters its peak period, catching hundreds of passengers off guard, pushing up spot airfares and putting the spotlight on the loss-making sector.
Indian carriers have placed orders worth USD 50 billion with Boeing and Airbus for aircraft to be delivered over the next decade, borrowing heavily and causing investors to remain wary of the sector.
Here are some facts about India's aviation industry:
* The country has six major airlines -- Jet Airways, Kingfisher Airlines, SpiceJet, Indigo Airlines, GoAir and state-run Air India.
* With the exception of Indigo, all the airlines are loss making.
* The three full service carriers -- Jet Airways, Kingfisher and Air India -- have combined debt of more than USD 13 billion.
* India allows foreign investment in the country's carriers to the tune of 49% but foreign airlines are not allowed to invest in them.
* Kingfisher and Jet have not been successful in tapping foreign investors in recent years. Billionaire Wilbur Ross invested in and subsequently exited budget airline SpiceJet in 2010, making it the only Indian carrier to get major foreign investment recently.
* India's industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers. Aviation Minister Vayalar Ravi also said his ministry was considering such a plan.
* Most mergers in the sector have run into problems as witnessed by Kingfisher's acquisition of the country's first low cost carrier Air Deccan in 2008. The combined entity is yet to post a profit.
* Air India has also not posted a profit since merging with former state-owned partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive.
* In 2007, Jet Airways acquired Sahara Airlines for 14.50 billion rupees (USD 289.3 million) and renamed it JetLite. But both parties have since been engaged in a legal battle over payment issues.
* Air India and Kingfisher have both undergone a debt restructuring process. Kingfisher cut its debt by issuing shares to 14 banks. But banks are wary of lending to large carriers.
* Indian states heavily tax sales of aviation turbine fuel, the key input for carriers, and ATF prices for domestic operations in India are higher than international benchmarks.
* Indian air traffic was growing at close to 19% in the first eight months of the year, according to government data. Analysts expect the pace of growth to continue.
* The Centre for Asia Pacific Aviation has forecast a record USD 2.5- USD 3 billion loss for Indian airlines for the year ending March 2012, with Air India alone likely to account for more than half of it.
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