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From good times to bad debts

The bleeding Kingfisher Airlines, which is struggling to survive, has been cutting costs to the extent that even hardcore loyalist are looking at other airlines. It needs money to pay its staff, creditors, suppliers, govt. Where’s the cash? Tushar Srivastava reports. Route routs and no shows | A gift that turned into a curse | Entire brand under pressure | Mallya owns...

india Updated: Feb 25, 2012 02:50 IST
Tushar Srivastava
Tushar Srivastava
Hindustan Times
Kingfisher Airlines,KFA,Vijay Mallya

The next time you board a Kingfisher Airlines (KFA) flight to India, be patient if the cabin crew takes its time to begin the in-flight services. After all, they too are hungry and need to eat before they can start serving guests.

“On international routes it becomes very difficult for us,” said an employee who did not wish to be named. “The company pays for the hotel, and we get complimentary breakfast. For the rest of the meals and expenses we are on our own. If you don’t get salary and allowances for months how can you manage when you have to make payments in euros?”

"It can easily take upto four to five hours or even more between checking out of the hotel and boarding the flight. With no money to buy food you would be damn hungry. So, they would obviously eat first and serve later," said a pilot, defending the crew.

Unpaid employees have left KFA in droves. Those who haven’t landed jobs are finding it difficult to survive. KFA, owned by liquor baron Vijay Mallya, hasn’t paid salaries for over two months. Paycheques have been delayed for many months now.

The bleeding KFA, which is struggling to survive, has been cutting costs to the extent that even hardcore loyalist are looking at other airlines. “They have stopped serving non-vegetarian food in economy class on domestic routes. The airline’s reputation has taken a beating,” said Gehna Puri, who runs a dance school in Delhi.

KFA did not offer comments for the story.

The airline owes money to the IT and excise departments, oil companies, airports and other vendors.

“KFA has a very grim future,” said aviation safety expert Captain Mohan Ranganathan. “They (DGCA) should suspend the operating permit of KFA until it gets its act together and clear all outstanding dues,” he said.

Mallya, who owns an F1 team and also a cricket team in the cash-rich Indian Premier League, had launched KFA with much fanfare in 2005. It was the billionaire’s gift to his son Siddharth on his 18th birthday.

The airline is in desperate need of cash. It has asked aircraft manufacturer Airbus, with which it has on order A380’s, A350’s, A320’s, to adjust deliveries.

Regional plane manufacturer ATR recently cancelled an order for 38 ATR-72 turboprop planes as KFA had failed to make pre-delivery payments. The airline hasn’t ever made a profit.

"KFA has tried over last 2-3 years to restructure its business model and has taken measures to reduce costs especially non fuel costs," said Kapil Kaul, South Asia CEO of Centre for Asia Pacific Aviation, an aviation consultancy firm. "It has tried to improve productivity, rationalise capacity, defer expansion plans but the huge interest and debt burden has made the company very vulnerable. Interests costs of upto 25% of your revenues cannot be viable in a business where the margins can be 5-8% at maximum."

First Published: Feb 24, 2012 21:26 IST