Cigar-puffing billionaire brewer Vijay Mallya, who lives up to his tag of India’s “King of Good Times”, is battling to keep Kingfisher Airlines afloat in the fiercely competitive aviation market.
India’s second-largest carrier, which flies one in five domestic passengers and also has international routes, has scrapped scores of flights to cut costs, stranding passengers in the middle of the Indian religious and wedding season.
The Bangalore-based airline, which has debts of $1.2 billion, is also losing staff as it struggles to pay salaries and is having difficulty meeting its fuel bills.
Kingfisher and other Indian airlines, which are also awash in red ink, have grown too fast, experts say, adding expensive planes to their fleets too quickly and pricing tickets at below cost to grab market share.
Kingfisher, which is named after Mallya’s popular beer brand — his flagship United Breweries is India’s biggest brewer — “does not see any risk to its future”, airline chief executive Sanjay Agarwal insisted last week.
But Kingfisher, which promises passengers “royal treatment”, has had a turbulent flight path since it was founded in 2005.
It boasts cabin crew so glamorous they are called “flying models”, who are instructed by Mallya to treat passengers “like guests in my own home”. The airline offers meals even on short hops and valets to haul passengers’ bags.
But despite its five-star service that has won many “King Club” fans, Kingfisher has never turned a profit and now its shares are at lifetime lows.
Just one of India’s five main carriers is in profit — no-frills airline Indigo. The country’s biggest airline, Jet, reported Friday a quarterly loss of $145 million. Kingfisher’s quarterly figures are expected Monday.
The Centre for Asia Pacific Aviation (CAPA) forecasts a $2.5-$3 billion loss for Indian airlines for the year ending March 2012, with bloated state-run Air India likely to account for over half.
Adding to the airlines’ woes are surging fuel prices — up 41 percent from a year earlier — and fixed costs such as fuel taxes which can be over five times the international average.
“Not only Kingfisher, but the civil aviation industry as a whole is facing a problem. The fuel price has gone up beyond imagination,” said Civil Aviation Minister Vayalar Ravi.
The government, already engaged in a massive bailout of Air India, says it has no rescue plans for Kingfisher but hopes banks will consider restructuring its debt.
“We want them (Kingfisher) to fly. I hope the banks will come forward,” Ravi said.
Earlier this year, Kingfisher won a breather when banks agreed to convert some debt into shares, taking a stake in the company.
Fond of designer suits, Mallya, who has a fleet of vintage cars, mansions and hosts lavish parties, has pledged personal assets as security against the airline’s debt.
Mallya is worth $1.1 billion, according to Forbes magazine. Kingfisher’s biggest shareholder, his United Breweries, has also pledged assets against Kingfisher’s debt.
The well-connected tycoon — he is an independent member of parliament — is also lobbying the government to let foreign airlines take a stake in Indian carriers, meaning Kingfisher could get a cash lifeline.
India’s Mint newspaper reported the government has in principle decided to allow investment by foreign carriers in the domestic aviation sector.
While many global carriers are also short of money, they are keen on investing in fast-growing Asia. Airlines such as British Airways have indicated they would like to invest in Indian carriers.
“Not just British Airways, all airlines around the world will look at the possibility to invest in Indian carriers,” Willie Walsh, chairman of British Airways parent IAG, said late last year.
Indian Prime Minister Manmohan Singh gave a boost to Kingfisher’s efforts to keep operating, adding late on Saturday that the government will explore “ways and means” to help the carrier. However, he did not elaborate.
