Is it our duty to fly loss-making routes, asks Mallya | india | Hindustan Times
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Is it our duty to fly loss-making routes, asks Mallya

india Updated: Nov 12, 2011 13:01 IST
Vijay Mallya


Tycoon 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% 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% 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% 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 percent 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.