--Regulator says airline has been unable to show any operations
plan
--License to remain suspended till airline gives revival
plan
--Airline may lose flight slots to rivals
(Adds details, analyst's comment, background)
By Anirban Chowdhury
MUMBAI-- India's Directorate General of Civil Aviation said
Saturday that it has suspended Kingfisher Airlines Ltd.'s
(532747.BY) license after the carrier failed to produce a plan on
how it will revive its operations.
The airline has cancelled all its flights since Oct. 1 due to a
strike by its employees over salaries.
"Kingfisher hasn't come to me with any operational plan. Until
it does, its license will remain suspended," Arun Mishra, director
general of civil aviation, told the Wall Street Journal.
Kingfisher's spokesman Prakash Mirpuri wasn't immediately available
for comment.
The suspension means Kingfisher may lose flight slots to its
rival local carriers. The government reviews flight schedules of
local carriers twice a year. It hasn't approved any slot for
Kingfisher Airlines for the winter schedule, although it has
allocated them to other airlines.
However, the regulator Saturday didn't cancel Kingfisher's
license, which means the airline won't have to apply to the
government again if and when it's ready to fly.
The suspension doesn't come as a surprise, given the airline's
deep financial troubles, but will discourage investors its chairman
Vijay Mallya has been trying hard to rope in to raise cash.
Kingfisher, named after India's most popular beer brand, started
flying in 2005 and aggressively grew by taking over then leading
low-fare carrier Air Deccan and ordering the world's biggest plane
the Airbus A380.
It was soon hit by high fuel prices, rising interest rates,
fierce competition from its peers, its own high debt and bleeding
international operations. Between May 2005 and June 30, 2012,
Kingfisher piled up losses of $1.9 billion according to a recent
report by Sydney's CAPA-Centre for Aviation. It also owes $2.5
billion to its lenders, suppliers, leasing companies and majority
shareholders and defaulted on at least $150 million worth of
debt.
In the last one year, the airline has slashed its operations by
a fourth of its original 400- flights-a-day schedule. Before the
shutdown in operations, it was flying 10 to 12 planes daily, down
from 64 last year. Kingfisher has in the last one year toppled from
being India's second biggest carrier to its smallest.
Kingfisher's management has been trying to persuade its
employees to resume work, but failed as it hasn't given any
assurance on clearing salary arrears.
On Oct. 5, India's aviation regulator issued a notice to the
airline asking why its license shouldn't be cancelled or suspended.
Kingfisher had until Saturday to respond to the notice. On Friday,
it asked the regulator to extend the deadline and said its
operations will remain suspended until at least Nov. 6.
Analysts said the airline's turnaround looks increasingly
difficult.
"Revival of Kingfisher Airlines was earlier and now as well
totally dependent on its promoters raising minimum $600 million
which is highly unlikely," said Kapil Kaul, head of CAPA south
Asia. He said the airline's turnaround will cost $1 billion.
Mr. Mallya said in September he is in talks with foreign
investors, including other airlines, to sell a stake in the
carrier. He is also in talks with Diageo PLC (DEO, DGE.LN) to sell
a stake in his group company United Spirits Ltd. (532432.BY), as
part of his plans to raise cash for the airline. Kingfisher's
parent UB Group has in the last six months pumped in 11 billion
rupees into it.
Kingfisher's plight may also sound alarm bells for Indian
carriers, most of which have been bleeding since last year because
of high costs, borrowing rates and the weakening rupee.
In the April-June quarter, Jet Airways (India) Ltd. (532617.BY)
-- the country's biggest carrier by marketshare -- posted a profit
after five quarters of losses by carrying forward foreign exchange
losses and by selling planes. SpiceJet Ltd. (500285.BY) reported a
profit as well, due largely to the sale of aircraft.
India's local air traffic fell 12% in September to 4.02 million
passengers as a slowing economy hurt travel demand.
Write to Anirban Chowdhury at anirban.chowdhury@dowjones.com