‘We’ll import ATF, save Rs 800 crore’

Mallya says talk of defaults by his airlines not true

When billionaire Vijay Mallya launched Kingfisher, the “value service” airline, in 2005, his aim was to become the largest carrier in India.

The flight path was well-chalked out, and with budget carrier Deccan coming under wing last year, he was reaching there. But that was when fuel prices were hovering around $60-$70 per barrel.

Now, with prices over $130, Mallya’s —- and his rivals’ —- soaring wings have brutally clipped. Kingfisher’s troubles have multiplied because of the acquired scale.
Mallya spoke to DNA Money’s Praveena Sharma on Sunday, explaining how he plans to pilot the carriers out of turbulence.

There is talk that your dues to oil marketing companies, the Airports Authority of India (AAI) and others have bloated beyond credit limits, and there is talk of defaults. What’s the story?
We have never defaulted on any payment, nor will we default in future.

Our volume of business with the oil companies and the AAI is really huge, now that there is a combined entity. Between Kingfisher and Deccan, we buy more than Rs 4,000 crore worth of jet fuel every year.

With Kingfisher alone, we purchased jet fuel worth Rs 2,000 crore, for which we had a credit limit of Rs 300-400 crore. Now, with Deccan, our fuel bill has doubled, as has our credit limit.

We have also given bank guarantees and other forms of securities to the oil companies and AAI to cover our credit-limit risk.

Is it said that civil aviation minister Praful Patel last week intervened to give Kingfisher a special two-week leeway to pay up dues of Rs 600 crore to the oil companies…
I was with Praful Patel on June 11, when he met the industry to address our issues. There was no mention of dues to either the oil companies or to the AAI.

Sources at the GMR Hyderabad International Airport say Kingfisher and Deccan have not paid airport charges since March…
The same group (GMR) is also operating the Delhi airport. If we had not paid their dues, would they allow us to land and takeoff from Delhi? So many Deccan and Kingfisher flights are operating out of the Delhi airport…

How are you tackling flying fuel prices?
I’m looking at importing fuel. This will bring down our fuel costs by Rs 800 crore annually. I’m working on it (the modality of importing fuel). What is compounding the issue is the high domestic price. The killer is the high sales tax by state governments, on top of an already high fuel price. Our fuel price is 60% more than prevailing international rates. We will most probably begin importing fuel in the next one to one-and-a-half months.

What about your international plans?
Everything’s on schedule. We will launch our first international flight on August 27.