Struggling Kingfisher in discussions on stake sale

Kingfisher Airlines is in talks with foreign carriers for a possible stake sale.

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Kingfisher Airlines, which has never turned a profit, is in talks with foreign carriers for a possible stake sale in the debt-laden Indian airline.

It follows a reform by the government announced two weeks ago to allow foreign airlines to invest up to 49 per cent in Indian carriers, one of a series of measures unveiled to help boost the country's economy.

"Yes, we are in talks," said Vijay Mallya, the chairman of Kingfisher Airlines. He declined to identify the carriers the airline was in discussions with or the size of the stake it would consider selling off. Mr Mallya, a billionaire, also co-owns the Force India Formula One team.

Indian airlines have been struggling amid competition in the sector, high jet fuel prices and a weak rupee. But the market has potential, with Boeing recently forecasting India would have the highest passenger growth in the world over the next 20 years. Kingfisher cut its Dubai route this year along with other international destinations as it sought to trim costs.

The carrier posted a loss of 6.51 billion rupees (Dh448.5 million) in the first quarter of this financial year, running from April last year to June, compared with a loss of 2.64bn rupees in the same period a year earlier. In an effort to turn around the business, the airline reduced the size of its fleet and cut routes, shrinking to become the smallest carrier in India. It was the second-largest airline in the Indian domestic market at the end of last year. Kingfisher also suffered cancellations and disruptions of its flights this summer as some of its pilots went on strike over non-payment of salaries.

"Kingfisher is struggling for a litany of reasons, not least because it was chasing traffic without focusing on yields," said Saj Ahmad, the chief analyst at StrategicAero Research. "That made them lose significant revenue on flights and is why it has never made a profit and is unlikely to in its current state."

The Centre for Asia Pacific Aviation has estimated Kingfisher needs US$600 million (Dh2.2bn) just to stay afloat.

Mr Ahmad believes the airline is not an enticing proposition for foreign carriers.

"Kingfisher is very unattractive now - it has so few routes that any investor would be better off looking at SpiceJet."