New Delhi: Kingfisher Airlines Chairman Vijay Mallya has said the carrier is working on a "holding pattern" basis with limited operation, pending policy changes.
"Due to the current situation, our company is operating as a "holding pattern" with limited operation, pending policy changes which are in the offing," Mallya said on behalf of Kingfisher's board in the company's Report of the Directors for the year 2011-12.
The report of the directors is part of the airline's latest annual report, which was released to its shareholders this evening ahead of their Annual General Meeting on September 26, 2012 in Bangalore.
In the airline business, a pilot is said to follow 'holding pattern' when an airplane makes several mid-air turns, while waiting for a clearance to land or to avoid crashing with other aircraft.
Kingfisher's net loss more than doubled to Rs 2,328 crore in 2011-12, from Rs 1,027 crore in the previous year. Its total long-term borrowings stood at Rs 5,695 crore as on March 31, 2012, down from Rs 6,306 crore a year ago. Besides, it had short-term borrowings of Rs 2,335 crore at the end of 2011-12, up from Rs 604 crore as on March 31, 2011.
Mallya in his 'Report of the Directors' said Kingfisher decided to downsize its operations in November 2011, given the pressure on the cost front due to unabated increase of fuel prices, rupee de-valuation, rising interest rate and continued downward pressure on yields.
"Despite the operational downsizing, the cash losses continued, leading to discontinuation of services from IATA's Billing and Settlement Plan (BSP)," he said, while adding that the airline still "designed alternate means to sell and distribute inventory."
As a part of the overall downsizing of operations during 2011-12, Kingfisher also temporarily shut down operations on its international network to contain operational losses, he added.
Mallya further said that Indian airline industry is currently exposed to one of the toughest operating environments and is expected to struggle with profitability pressures, with one of the highest prices for jet fuel across the world, rupee depreciation and high cost of borrowing.
"The Government of India is in the process to usher in fiscal measures and\ reforms that will make the operating environment more conducive for profitable business," he said.
He also said that the government is in the process of modifying the Foreign Direct Investment (FDI) policy that will allow foreign airlines to invest in Indian carriers.
Kingfisher, he said, will undertake a phased and pragmatic approach to re-induction of capacity as well as further market expansion and the focus will be on maximising the "nascent potential of the domestic Indian market and capitalising on strategic international routes."
The airline also said in its annual report that the current FDI policy does not allow foreign airlines to invest in domestic airlines, although a 49 per cent investment is allowed by foreign institutional investors.
Kingfisher said that the government is "actively considering relaxing" FDI norms to include foreign airlines, after representations made by it and other domestic carriers.
"This change in policy could provide your company with widened access to equity capital and potential to induct strategic partners," the airline told its shareholders.