Bloomberg News

Kingfisher Air Falls as India Seeks ‘Firm’ Recovery Timeline

January 06, 2012

(Updates share prices in second, fifth paragraphs.)

Jan. 6 (Bloomberg) -- Kingfisher Airlines Ltd., the Indian carrier that has cut flights amid a cash shortage, dropped the most in three weeks after being asked to submit a “firm” recovery plan to the nation’s aviation regulator next week.

The airline, controlled by billionaire Vijay Mallya, fell 4.7 percent to 19.50 rupee in Mumbai trading, the most since Dec. 16. The Directorate General of Civil Aviation requested plans with “firm” timelines from carriers including Kingfisher after conducting financial and safety audits.

Kingfisher has sought new funds after posting losses totaling about 47 billion rupees ($890 million) over the past three fiscal years, according to data compiled by Bloomberg. Indian carriers have struggled to turn surging demand into profits because of price wars, competition from state-owned Air India Ltd. and a slumping rupee.

“Tough times continue for Kingfisher,” said Jitendra Panda, the head of broking at Future Capital Holdings Ltd. “It will be difficult to execute whatever plans they have for a turnaround given the slowdown in the Indian economy.”

Jet Airways (India) Ltd., the nation’s biggest carrier, closed little changed at 176.10 rupees. Budget airline SpiceJet Ltd. rose 1.2 percent.

Engine Shortage

The DGCA’s checks showed that Bangalore-based Kingfisher had a number of planes out of service because of a shortage of engines, according to a statement yesterday from the Ministry of Civil Aviation.

Kingfisher has enough pilots and engineers to maintain services and the regulator had no “significant findings or concerns with regard to safety,” Sanjay Aggarwal, the airline’s chief executive officer, said in a statement yesterday.

Neither the carrier nor the regulator elaborated on what information would be needed in the recovery plan or what would happen if the deadline was missed. Three calls to the mobile phone of Kingfisher’s spokesman Prakash Mirpuri didn’t go through, while a call to E.K. Bharat Bhushan, the director general of civil aviation, went unanswered.

The regulator also found a shortage of training captains at Air India Express and other pending safety issues, according to the statement. The DGCA will undertake a financial check on Air India next week, the ministry said.

Brand Pledge

State Bank of India, Kingfisher’s biggest shareholder not tied to Mallya, also yesterday said it would class loans to the carrier as non-performing assets, a step toward writing them off.

Kingfisher has pledged its brand, office furniture and other assets against debts to lenders of about $1.2 billion, Junior Finance Minister Namo Narain Meena said in response to a question in parliament in New Delhi last month.

The airline plunged 68 percent last year in Mumbai trading, compared with a 25 percent slump in the benchmark Sensex. Jet Airways and SpiceJet both fell almost 80 percent. Airlines in India may lose $2.5 billion in the year ending March, according to the CAPA Centre for Aviation, which advises carriers.

--Editors: Neil Denslow, Garry Smith

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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


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