After oil firms’ rebuff over dues, rival Jet refuses to accommodate Kingfisher passengers due to non-payment.
After oil companies and airports, rivals have stepped up pressure on Kingfisher Airlines (KFA). Jet Airways, the leader in market share, has stopped accepting passengers from KFA in case of a cancellation or disruption over a payment dispute. KFA, facing acute cash crunch and mounting losses, has cancelled nearly 30 flights across its network for the next 10 days.
Officials said the airline took the decision since KFA had not cleared Rs 20 crore in dues related to passenger transfers. Typically, a carrier whose flight is disrupted issues a ‘flight interruption manifest’ on the basis of which the other airline issues tickets. The bill settlement between the two is made through the International Air Transport Association’s clearing house at Geneva in 30 days.
Full-service carriers, which are members of IATA, sign prorate agreements to determine revenue sharing. These have a clause allowing airlines to transfer passengers to other carriers at a pre-determined rate in case of cancellations or disruptions. “It (KFA) owes us close to Rs 20 crore. We stopped accepting their passengers,” said a Jet official, who did not wish to be named. Jet Airways spokesperson did not respond to an email query.
KFA said, “The company has reduced frequency of some of its flights, predominantly over weekends or on some routes where there has been slow demand. For a limited period, these flights are either being cancelled or clubbed with other KFA flights in a well-controlled pre-determined manner. These steps have been taken in a planned manner and in close coordination with our travel partners and guest relations teams to avoid any inconvenience that may be caused to our guests.”
The Directorate General of Civil Aviation has taken cognizance of the sudden cancellations and issued a notice to Kingfisher under Rule 140 (a) of the Aircraft Rules, 1937, for not taking prior approval before cancelling flights, as is required by the rule.
It also asked the airline what steps it had taken so far to take care of the passengers of the flights cancelled in terms of returning their fares, accommodating in alternative flights or providing modes of transportation.
Recently, KFA’s woes have compounded. Oil companies have refused credit to Kingfisher and now, multiple flight cancellations. Earlier, the Airports Authority of India had put KFA on a cash-and-carry mode, after a Rs 15-crore cheque issued by the latter bounced.
Last month, Hindustan Petroleum Corporation, which handles most of Kingfisher’s fuel requirements, temporarily suspended supply to the airline over unpaid dues. The supply was restored after a few hours.
Earlier in the year, GVK and GMR groups, which run the Mumbai and Delhi airports, respectively, had threatened to put the airline on cash-and-carry over dues. The airline has not declared profit even once since its launch five years ago. It incurred a loss of Rs 1,027 crore last year.
It posted a loss of Rs 263 crore in the first quarter of this year. It has Rs 6,000 crore in debts, after a part was restructured with the approval of banks. The restructuring involved conversion of lenders’ debt of Rs 1,355 crore and promoters’ debt of Rs 648 crore into share capital. It has now sought banks’ help to substitute high-cost rupee loans with foreign loans. Last week, the company denied reports it was approaching banks for another round of debt revamp.
A senior Bank of India official said the chances of banks agreeing to another restructuring package for Kingfisher were remote. Banks have already taken a hit on equity shares of the ailing airline. They converted debts worth over Rs 600 crore into equity shares. The conversion was done at a price of around Rs 64. Kingfisher shares on Thursday closed at Rs 21.70, down nine per cent, on the Bombay Stock Exchange.
Bankers said as a part of the restructuring package, the airline got a breather in the form of a moratorium on paying principal amount. It is paying interest on loans, but with a delay, leading to penalties. “The company is not unviable. It is a commercial enterprise with a decent fleet, good working culture. It needs additional capital,” a senior IDBI Bank official said.
