MUMBAI (Reuters) ? Kingfisher Airlines shares slumped 18 percent to a life low on Friday as the airline continued to cancel flights and newspapers reported leasing companies were planning to take planes back and pilots were leaving.
The airline's chief executive officer Sanjay Aggarwal told television channel NDTV Profit 100 pilots had quit over the past months, but said it was part of natural attrition and the current cancellations were not on account of staff shortages.
Kingfisher, India's second-largest private airline, run by liquor baron Vijay Mallya, has struggled to raise cash to operate its cost-intensive business in a highly competitive market place.
It had cancelled scores of flights daily since Sunday in an effort to cut capacity and minimise costs, leaving passengers stranded as the Indian travel season enters the peak period.
"There is no doubt in our mind as a management team or Dr Mallya as a promoter of the airline, or the UB Group, about the credibility or the future of the airline," Aggarwal said.
The Economic Times newspaper reported on Friday that some companies who have lent aircraft to the loss-making airline planned to take them back. It also said the Director General of Civil Aviation had sought an explanation from the airline for the mass cancellation.
A Kingfisher spokesman declined to provide immediate comment to Reuters.
Six weeks ago Kingfisher had announced intentions to recast its business model by doing away with its low-cost service Kingfisher Red.
It said on Tuesday it has started reorganising its aircraft in an effort to focus on the full-service market and that required some of its flights to be out of service for the next few weeks. Once the reconfiguration is complete the aircraft will be pressed back in service it said.
"No shutdown, only ensuring loss minimisation by a flight rationalisation and enhanced revenue through reconfiguration of aircraft," Chairman Vijay Mallya was quoted by Economic Times as saying on Friday.
At 1:13 p.m., Kingfisher shares were down 12.2 percent at 19.05 rupees, off a low of 17.7 rupees, while the BSE index was down 1.28 percent. Shares of UB Holdings were down 11.75 percent.
STRUGGLING TO SURVIVE
Kingfisher shares have lost more than 67 percent of value so far this year. The airline, which started business as a full service carrier in 2005 and listed when it bought out budget airline, Air Deccan in 2008, has never made a profit.
Its auditors noted in the annual report this year that the firm needs extra cash to survive in a challenging market.
Kingfisher had aimed to raise $250-$350 million through an issue of global depositary receipts in January but did not follow through on the plan. It also tried to attract private equity investment in 2008 and 2009 but no deal was forthcoming.
Earlier this year, Kingfisher cut its debt through a restructuring by issuing shares to 14 banks, including State Bank of India and ICICI Bank. But its problems continue.
Just last week it said it had written to banks for further help by substituting high-cost rupee borrowings with lower cost foreign currency debt and asked them to consider the weakening rupee and high international fuel prices when appraising its working capital requirements.
"The only way out is they sell a stake to a foreign airline company if the government passes the rule anytime soon, which I think they can, given the circumstances of the whole industry," said Sharan Lillaney, analyst at Angel Broking.
India currently allows foreign investment of up to 49 percent in Indian carriers, but foreign airlines are not allowed to invest directly or indirectly in domestic carriers.
But India's industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers.
(Reporting by Aniruddha Basu and Sanjeev Choudhary; Editing by Rosemary Arackaparambil)
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