Kingfisher Airlines to exit low-cost operations; raise capital

Bangalore: Kingfisher Airlines would stop operations of low cost carrier Kingfisher Red, Chairman Vijay Mallya said today.

“We have several initiatives. We are doing away with Kingfisher Red because we don’t intend to compete in the low-cost segment,” Mallya told reporters here after the company’s AGM. He added that margins and yields are better in Kingfisher Class than Kingfisher Red.

Kingfisher’s move comes at a time when demand for low-fare air travel continues to grow in India. Its rival Jet Airways recently said it plans to introduce low-fare flights to short-haul overseas destinations.

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“We believe there are more than enough guests who prefer to travel the full-service Kingfisher Class, and that shows through in our own performance where the load factors in Kingfisher Class are more than in Kingfisher Red”, he said. He also said the company’s shareholders have approved Rs 2,000 crore rights issue.

Meanwhile, Mallya said Kingfisher Airlines is working with a consortium of banks to further reduce interest costs and raise working capital as the carrier looks to restructure its fleet by selling and leasing back some of its aircraft to lower debt.

“The high cost of ATF (aviation turbine fuel) coupled with a weakening rupee is the biggest challenge that the whole aviation industry in India is currently dealing with and we are no exception,” Vijay Mallya said in a speech at the airline’s annual shareholders’ meeting on Wednesday.

Shares of Kingfisher Airlines have lost about 63 percent in value in a year, with the company suffering losses on high oil prices and intense domestic competition.

The airline continues to work aggressively to raise fresh capital, Mallya said, admitting it would not be an easy task.

The airline also plans to convert part of its rupee loans into low-cost forex loans based on existing cash flows, he said.

The airline, which operates 370 flights every day, expects to increase its capacity by 10 percent by reconfiguring its aircraft which will significantly improve revenues, he said.

With inputs from Agencies