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Minister: Government bailout for Kingfisher “not possible”

NEW DELHI, India - Cash-strapped Kingfisher airlines that has been in the news for numerous flight cancellations in the past few days, has now approached the government for help.

Minister: Government bailout for Kingfisher “not possible”

NEW DELHI, India – Cash-strapped Kingfisher airlines that has been in the news for numerous flight cancellations in the past few days, has now approached the government for help. Sources said the airline has sought Finance Ministry’s help on its loans. But the airline maintains it hasn’t asked for a government bailout; it has asked banks to increase limits in order to meet escalating operations costs.

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Kingfisher has grounded more than 120 flights over the last four days. Today, at least 40 flights were cancelled and scores of pilots and other ground-staff called-in sick. Kingfisher says flights had to be cancelled because of route rationalisation and due to the airline’s efforts at improving productivity. Ina statement, the airline said, “As per the revised schedule, it will offer 300 daily flights connecting 54 cities as compared to its previous schedule of 340 flights.” (Read: Kingfisher issues statement)

“Kingfisher has been in business for six years and it will continue to be around. There is no doubt in our mind as a management team or Dr Mallya as a promoter of the airline about the credibility or the future of the airline,” Kingfisher’s CEO Sanjay Aggarwal said.

Passengers too are getting mails informing them of recent developments and changes. The airline is stressing that the “reports about flights being cancelled owing to the supposed exodus of pilots appears to be falsified.”

Civil Aviation Minister Vayalar Ravi today said that the government might speak to banks for Kingfisher Airlines, but a debt recast like was done for Air India was not possible. Mr Ravi said he had spoken to Finance Minister Pranab Mukherjee and Oil Minister Jaipal Reddy after Mr Mallya spoke to him seeking help. “There is no package and government of India has no plans for a package. He (Vijay Mallya) did not ask for a package. But this is one of the major airlines and the government did not want to see it close down. I hope the banks will come forward. We will talk to them.”

But political parties, including the Congress, remain wary of any plan that could involve a government bailout. “The question is indeed very fundamental. And it raises a very basic philosophical construct – that the government should be walking the extra mile to be bailing out private companies,” Congress spokesperson Manish Tewari said.

Former Finance Minister and senior BJP leader Yashwant Sinha said, “If Kingfisher Airlines is not in a position to run on a financially viable basis, then it should find its own way – close down, merge, whatever, there are numerous possibilities. But there is no case for a government bailout.”

Airline owner Vijaya Mallya spoke to the Directorate General of Civil Aviation (DGCA) yesterday. Mr Mallya reportedly assured the DGCA that the airline is working out a contingency plan to minimise passenger inconvenience in the coming months.

The DGCA has issued a notice under Rule 140(A) of the Aircraft Rules, 1937, asking Kingfisher why it had not taken the regulator’s prior approval to curtail its flight schedules as required by this rule. It has also sought to know whether the airline had taken any step to facilitate the passengers inconvenienced by the cancellations.

Meanwhile, all the oil marketing companies – Hindustan Petroleum Corporation Limited, Indian Oil Corporation and Bharat Petroleum Corporation Limited – have denied extending credit line to the liquor baron Mallya-owned airline and asked it to pay for lifting jet fuel on a daily basis.

Sources have said that the Delhi International Airport (DIAL) and the Airports Authority of India have threatened to impose cash-and-carry on the airlines, which means the company will not get any more credit and will have to pay for use on a daily basis. Kingfisher owes about Rs. 220 crore to Airports Authority of India alone.

Shares of Kingfisher Airlines touched an all-time low before settling sharply down by over 9 per cent as the cash-strapped company continued to face serious financial turbulence. Kingfisher shares settled at Rs. 19.65, down 9.45 per cent.