Kingfisher in talks with oil cos for ‘phased’ repayments

“We are discussing with Oil PSUs to repay in a phased manner..we want to take a little more extended credit,” said Ravi Nedungadi, Chief Financial Officer of UB Group, which holds a controlling stake in the airline.

“We are discussing the timeline (for repayment), it would be inappropriate to reveal any more, but there is an understanding developing on both sides,” he added.

He added that getting funds from banks was becoming a major problem for the airline industry as a whole.

“Every company is caught in a bind because the banking sector is unable to lend even if they are willing to. They just don’t have the liquidity. What option do we have?,” he said

The real solution would be to bring ATF prices down, he said.

ATF, or aviation turbine fuel make up between 30 and 45 per cent of an airline’s operating cost. In August, a kilo-litre of ATF cost 73,600 rupees in Mumbai, compared with 46,500 rupees equivalent in Singapore.

Its code sharing agreement with top private carrier Jet Airways will yield cost benefits in another month or two, Nedungadi said.

Kingfisher and Jet this week set up an alliance to cut costs through code sharing as well as sharing of ticketing, ground services, fuel management and crew training and utilisation.

Both airlines will save about 15 billion rupees annually, Kingfisher Chairman Vijay Mallya had said.

Kingfisher and Jet are also planning to return 14 narrow bodied leased aircraft in an attempt to rationalize its fleet, he said, adding that the exercise was not yet complete.

“The decision has not been finalised, the 14 aircraft we are planning to return is more of a target,” he said, adding that the carriers to be returned would be A-320s and Boeing-737s.

“The industry on the whole has to contract and become more efficient, but for that we have to tide through this current phase which is very challenging,” he added.

The alliance between Jet and Kingfisher would not result in a monopoly in the airline industry or hurt discount carriers, Nedungadi said.

“Low cost carriers are offering a completely different product. The problem is where you try to offer a full service product at the cost of a no-frills one,” he said.

Shares of Kingfisher Airlines were up 5.07 per cent at 46.60 rupees in a flat Mumbai market.