In yet another indication of its deepening financial crisis, Kingfisher Airlines informed all its employees that their July salaries may be delayed.
Kingfisher lost Rs 1,609 crore on net sales of Rs 5,270 crore in 2008-09. Flamboyant owner Vijay Mallya is trying desperately to raise funds for his cash-strapped company.
Hitesh Patel, executive vice-president, Kingfisher Airlines, which has, over the last year, cut its fleet size from 89 to 69, emailed all employees saying: “Along with all other airlines, we are in a tight situation regarding finances. You can expect to be in embarrassing situations with our vendors; your salaries may be delayed but never beyond the 7th.”
In a statement later, Mallya, chairman & CEO of the airline, said: “The email says salaries may be delayed but never beyond the 7th, which is the last day as per law. This was done to align salary payments with revenue collection dates. If we pay salaries before the legally due date, what’s the problem?”
This is not the first time that Kingfisher will delay salary payments but this is the first time that it has formally informed its employees, indicating, perhaps, a worsening cash flow situation.
“This is a global phenomenon afflicting the aviation sector in India. We are very concerned,” said civil aviation minister Praful Patel.
The International Air Travel Association, the apex body of airlines in the world, estimates that airlines in India will lose $ 2 billion (Rs 9,600 crore) during the year.
Kingfisher became India’s largest airline within four years of its launch in 2005 with a 25.3 per cent market share, but owes public sector oil companies more than Rs 900 crore for jet fuel it has bought on credit.
Mallya, who personally guaranteed part of a recent Rs 1,900-crore loan from State Bank of India, is looking around for more.
But investors are wary of investing in airlines. Finding all doors shut, the Kingfisher board has decided to appoint merchant bankers to expeditiously raise Rs 500 crore through a sale of shares.