Kingfisher Airlines Takes Steps To Reduce Losses

 - December 5, 2011, 9:30 AM
Kingfisher plans to cut first class seating and increase economy offerings across its fleet.

India’s Kingfisher Airlines is attributing the grounding of 15 aircraft and de-leasing of another two to “rationalization” of its network to counter deep financial losses.

“The airline industry in India is going through a tough period due to high costs and lower yields,” said Kingfisher Airlines CEO Sanjay Aggarwal. “We are no exception. We are taking steps to improve our financial performance and are rationalizing network, dropping unprofitable flights and expediting fleet reconfiguration.” 

The airline is reconfiguring all its Airbus aircraft to increase the number of economy seats by approximately 10 percent. It also plans to drop its Kingfisher Red no-frills economy brand to retain just two classes of service: Kingfisher First and Kingfisher Class (economy). “The reconfiguration initiative will require up to three aircraft to be out of service over the next three months at any given time,” said Aggarwal.

Separately, a company spokesperson refused to comment on the status of Kingfisher’s 12 grounded ATRs, citing fast-changing circumstances and the airlines’ intense discussions with the government, its financiers, its partners and service providers. 

However, Aggarwal said, “Some of the ATRs are grounded for scheduled maintenance, which any airline would have at any given time.” Kingfisher’s turboprop fleet consists of 25 leased ATR 72-500s and a pair of ATR 42-500s.

Meanwhile, the last of the 14 A320s grounded last year resumed service two months ago, following resolution of “issues” relating to maintenance, repair and overhaul due to absence of a long-term contract with vendors.

Indian airlines have encountered a low point since the beginning of global economic recession in 2008. Increased capacity, massive increases in fuel costs and other expenses and a weak rupee without a comparative increase in revenues have combined to exacerbate their woes.

Kingfisher’s net losses rose 78 percent, to 4.69 billion rupees ($89.9 million), in the second quarter ending September 2011. Competitors fared no better: Jet Airways experienced a 354-percent increase in losses and SpiceJet saw its losses rise by 233 percent.

Kingfisher has entered talks with an Indian strategic investor to infuse additional cash flow. Interest payments on its $1.3 billion debt absorb almost a quarter of its earnings. The airline has deferred a pending order for five Airbus A380 superjumbos for the third time (for at least another five years) and also plans to cancel orders for two A340s.