Kingfisher Airline summoned by DGCA

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DGCA summons KF CEO, says passengers first

The Directorate-General of Civil Aviation (DGCA) summoned the CEO of Kingfisher Airlines, Sanjay Aggarwal, and ordered the airline to accomodate passengers, affected by cancelled flights, with other airlines.

DGCA summons KF CEO, says passengers first

The DGCA response came after Kingfisher cancelled 17 flights on Monday, for a third day in a row, from Bangalore and Mumbai and also rescheduled two flights. The airlines had also cancelled 28 flights on Sunday, February 19.

Meanwhile, Civil Aviation Minister Ajit Singh said in response to the crisis that there were no plans to bail out the troubled airline. The airline must talk to the banks and sort the issue out, he added.

Earlier, Kingfisher Airlines (KFA) officials, despite repeated attempts, declined to confirm or deny the developments. Instead, they repeatedly said that “we shall issue a statement when required” and refused to comment on the potential action by the DGCA.

The cancellations have affected incoming or outbound flights in Mumbai, New Delhi, Chennai and Bangalore.

The abrupt flight cancellations had created major problems for passengers waiting to travel after having booked their tickets months in advance, an official at the Chhatrapati Shivaji International Airport said.

However, Sunday, the beleaguered carrier reeling under financial losses had claimed that despite flight disruptions since the past couple of days, it has not shut down any stations from its schedules, an official said.

The developments have also worried passengers intending to travel on KFA flights in the next few days or weeks.

“Last minute cancellations jeopardize our travel and onward plans, while other carriers charge heavily for the same sector if we try to cancel and make alternate bookings,” said A.A. Kinariwalla, a manager with a multinational in Mumbai, who is a frequent flier on domestic and international sectors.

A KFA spokesperson blamed the flight disruptions on certain unexpected incidents like ‘bird hits’ which rendered its aircraft out of service.

The flight disruptions are expected to continue for another three to four days with only 208 flights in operations, but the carrier has not shut down nor does it plan to close down any stations, the official said.

‘The speculation that we are reducing our operating schedule from 240 flights a day are ill-founded, as we will operate the full schedule on our booking system within the next four days,’ the spokesperson added.

While admitting that its bank accounts have been attached by the Income Tax Department, KFA said in the past also similar issues have happened and they have been resolved.

‘We have had a good meeting with our consortium of Banks who have accepted, in principle, the viability study prepared by SBI Capital markets and independent consultants. Our request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals,’ the spokesperson said.

The developments come after high fuel costs and falling revenue resulted in KFA losses in the third quarter of the current fiscal mounting to Rs.444 crore from a net loss of Rs.254 crore suffered in the like quarter of 2010-11.

Source: India Syndicate

Policy on import of jet fuel silent on logistics

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Wed, 08 Feb 2012 08:18:39 GMT

Policy on import of jet fuel silent on logistics: Experts

Airlines welcomed the decision of a ministerial panel to allow direct import of fuel, but aviation experts said several questions remained unanswered, particularly on logistics, as airports don’t have private fuel storage facilities.

“The news is very positive for the airline industry. But we have to see how the airlines will import the fuel. Do they have the cash to do so,” said Sharan Lillaney, aviation analyst at Angel Broking, reacting to the decision Tuesday.

“There are other questions as well: Where will they store the fuel? Will they use the infrastructure of oil marketing companies? Will oil companies allow that? So, there needs to be clarity on these things first,” Lillaney told IANS.

A group of ministers headed by Finance Minister Pranab Mukherjee Tuesday decided to move the cabinet with a proposal to allow airlines to directly import aviation turbine fuel to help them save on taxes and thereby cut their operational costs.

Several airlines have been facing one of the toughest times and wanted the government to help them out by permitting direct import of jet fuel that was now accounting for close to 50 percent of their operational costs.

‘We have applied officially to the commerce ministry for direct import of fuel. If we import fuel directly for our own use we become an actual user. Therefore, we won’t have to pay sales tax and other levies,’ Kingfisher Airlines chairman Vijay Mallya had said.

According to Amber Dubey, director aviation at global consultancy firm KPMG, airline companies may initially need to depend on oil marketing companies for infrastructure and expertise, since the business of jet fuels is a complex one.

‘Plus, an airline cannot get into trading business and sell the same to other airlines. We are likely to see new models of collaboration between airlines, oil companies and providers of logistical service providers in the near future,’ Dubey told IANS.

At some airports like in Mumbai, there is no scope for private firms, or airlines, to set up additional facilities to store and vend jet fuel due to space constraints. But land is available in some others like in Hyderabad and Delhi, experts said.

At present, the government’s foreign trade policy holds jet fuel as a restricted item for private import, which can only be brought in through authorised companies. It was also not clear if domestic oil retailers can sell jet fuel at international rates.

Source: IANS

Aviation stocks rally after direct jet fuel import allowed

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Tue, 07 Feb 2012 16:03:26 GMT

Aviation stocks rally after direct jet fuel import allowed

Mumbai: Scrips of three listed domestic carriers — Jet Airways, Kingfisher Airlines and SpiceJet — rallied after the government Tuesday allowed airlines to import jet fuel directly.

Aviation stocks rally after direct jet fuel import allowed

The decision on direct jet fuel imports was taken by an empowered group of ministers (EGoM) headed by Finance Minister Pranab Mukherjee.

Analysts said the move, announced by Civil Aviation Minister Ajit Singh, would help airlines to cut 10-15 percent of their operating cost.

The move will enable airlines to directly import jet fuel as an end user, thereby saving sales tax, which ranges between 20-35 percent and is levied by state governments.

The Indian aviation sector been reeling under rising aviation turbine fuel (ATF) prices caused by high sales tax and other levies. Domestic airlines are estimated to have lost around Rs.3,000 crore in the first six months of this fiscal.

Mumbai: Scrips of three listed domestic carriers — Jet Airways, Kingfisher Airlines and SpiceJet — rallied after the government Tuesday allowed airlines to import jet fuel directly.
This is very positive news for the industry. The airlines can be able to save up to 10-15 percent of their operating cost as jet fuel accounts for nearly 50 percent of the cost,’ Sharan Lillaney, aviation analyst, Angel Broking told IANS.

‘The decision will help the airlines to break-even, pay back the oil marketing companies.

The scrip of Vijay Mallya-led Kingfisher Airlines hit an intra-day high of Rs.30.90, up 20 percent from Monday’s close of Rs.25.75 at the Bombay Stock Exchange. The stock was hovering around Rs.28.50 in afternoon trade.

The Jet Airways stock too gained 18.06 percent and touched a high of Rs.351.90 from the previous close of Rs.298.05. The stock was Rs.336.90 around 2.30 p.m.

Budget carrier SpiceJet also gained 19.51 percent at BSE and touched an intra-day high of Rs.29.40 from the previous close of Rs.24.60

Analysts, however, said more clarity was required as to how airlines would manage the logistics of storing and importing fuel.

‘We have to see how the airlines will import the fuel, do they have the cash to do so, where will they store the fuel, will they use the oil marketing companies’ infrastructure or not. So there needs to be clarity on these things first, besides this, the news is very positive,’ said Lillaney.

Airlines have not yet come out with any logistics plan for storing and importing the fuel. This was one of the arguments by the three oil marketing companies Hindustan Petroleum, Indian Oil and Bharat Petroleum, who were opposing the move.

ATF is currently sold at Rs.71,155.22 per kilolitre (kl) in Kolkata, at Rs.67,702.21 per kl in Chennai, at Rs.63,864.31 per kl in Mumbai and Rs.62,907.82 per kl in New Delhi.

The average fuel price in cities like Kuala Lumpur is around Rs.41,000 per kilo litre, followed by Singapore at Rs.42,000 and Dubai at Rs.43,000.

Source: IANS


Kingfisher’s entry into Oneworld Alliance deferred

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Kingfisher’s entry into Oneworld Alliance deferred

The joining of Kingfisher Airlines into the global airline grouping “Oneworld Alliance” was put on hold on Friday due to the financial crisis faced by the Vijay Mallya owned carrier.

Kingfisher's entry into Oneworld Alliance deferred

The development came a day after the International Air Transport Association (IATA) suspended Kingfisher Airlines from its Geneva-based clearing house (ICH) due to non-payment of dues to airline members.

“Kingfisher Airlines and Oneworld today agreed to put the Airlines entry into the alliance on hold to give it time to strengthen its fiancial position,” a joint statement issued in Washington said tonight.

Kingfisher was slated to formally join the alliance on February 10.

“These are turbulent times for the arirline industry in India and in many other parts of the world. We have been working closely with Kingfisher over the past months and it has become increasingly clear recently that the airline needs more time to resolve the financial issues it is confronting before it can be welcomed into Oneworld,” the alliance CEO Bruce Ashby said in a statement.

He said the airline would be inducted on a ‘new joining date once it is through with this current period of turbulence.’

Mallya said that in view of ‘many priorities centred around Kingfisher’s recapitalisation efforts, we felt it prudent to defer our entry into the alliance for a little while.’

‘This would allow the ariline to focus on the issues at hand,’ he said, adding, ‘We look forward to being part of the alliance very shortly.’

Kingfisher Airlines slid from a net loss of Rs 263 crore in the first quarter of 2011-12 (FY12) to a net loss of Rs 469 crore in the 2nd quarter of the fiscal. DGCA has also asked the airline to redouble its recapitalisation efforts and ensure that safety parameters are not compromised at any cost.
Source: PTI

The Indian Aviation Crisis

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Indian Aviation in Crisis

It’s the irony of Indian aviation that despite a market growing at 18 per cent for last 11 months, five out of six Indian airlines are bleeding. If Air India was in the news for the last few months over the CAG report, aircraft purchases, and merger issues, Kingfisher Airlines has been in the focus in the last few days for flight cancellations, cash shortages, and survival fears.

Kingfisher hoped that the press interaction on November 15th would clear much of the negative air. The airline listed out a few options in its kitty to tide over the turbulent times. But the statement that the airline was “in discussions with a strategic Indian investor,” was perhaps, the most attractive of all solutions provided by the airline. After all, such an investor will certainly help the airline tide over its additional working capital need of Rs 800 crore and also address the issue of its nearly Rs 7,500 crore worth of debts.

Kingfisher’s chairman Vijay Mallya told Business Today that the strategic investor could put in upwards of Rs 1,000 crore in the airline. He also said that the airline has applied for working capital loans from banks worth Rs 600 crore. This will certainly provide the airline the much needed fresh lease of life. At least till the aircraft reconfiguration and route rationalisation measures start showing results.

But Kingfisher’s pains are mirrored -in a lesser extent- in the operations of its peers as well. All the three listed airline companies have shown a loss for the June to September period. High aviation fuel prices and depreciating rupee is where the blame has been assigned. Then there are policy issues, like high sales tax on aviation fuel and airlines having to fly unviable routes to develop connectivity in the country, that are adding to the hardship. Lastly, it’s the inability of Indian airlines to hike ticket prices that is hitting them the hardest.

Vijay Mallya, in his interaction with the press on November 15th, did admit that one way to fly Kingfisher out of the mess was to raise prices. But he also conceded that the airline had “got stuck” while trying to raise prices. Dinesh Keskar, India head for aircraft manufacturer Boeing, estimates that Indian carriers are under-cutting themselves by as much as Rs 1,000 on prime routes like Mumbai-Delhi.

It’s the way the market is structured that prevents any airline in India from raising prices. No airline owns a significant chunk of the market, which means that if one airline does try to hike fares and others don’t follow suit, its fliers will be easy business to its competitors. This means that no airline raises prices until it knows that others are likely to do the same.

So until one of them decided to turn bold, bank on its product and hike fares, airlines can merely hope for another consolidation -like how Jet Airways bought Air Sahara and Kingfisher Air Deccan and got some control over the market. Or they can hope for some relief in terms of economic conditions or policy changes.