Cutting its costly and loss-making international flights is seen as a necessary step by industry analysts if Kingfisher is to salvage its flagging business. It might not however, be enough to bring bankers back to the table.
"This is absolutely a good move by Kingfisher and an overdue one," said an aviation equity analyst in Mumbai. "There was no scale in the overseas business and it was bleeding cash. But until there is an upturn in the domestic business too, bankers will still stay away."
Shares in the airline rose as much as 3 percent after the news it was cutting its loss-making overseas operations, which analysts had been advocating for some time. The shares later retreated to fall 0.5 percent. The stock has lost around 57 percent of its value since last April.
Kingfisher, which has slashed its operations as pilots have walked out and authorities froze its bank accounts, said in a statement it is urgently searching for working capital. Foreign investors have shown an interest in the carrier, it added.
"We would like to confirm that we are curtailing our wide-body overseas operations that are bleeding heavily," the airline said on Wednesday, adding that it had already returned one Airbus A330-200 to its UK lessor as a result.
Wide-body aircraft are used by Kingfisher to fly to the UK, Thailand, Singapore, Dubai and Hong Kong. The airline provided no details on its international flights to regional destinations such as Sri Lanka.
"Positive and immediate action is being taken on all fronts to cut costs," the airline said.
Kingfisher posted a loss of $90 million in the quarter to end-December. International operations accounted for more than 70 percent of the airline's losses before interest, tax, depreciation and amortization during the quarter.
The carrier, which has never turned a profit, has become the poster child of India's struggling airline industry that is saddled with high fuel costs, stiff competition and low fares.
The airline, which has debt of about $1.3 billion, needs at least $400 million soon to keep flying, according to the Centre for Asia Pacific Aviation, an industry consultancy.
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Kingfisher, controlled by flamboyant liquor baron Vijay Mallya, has been a key supporter of proposals to allow foreign carriers to buy stakes in Indian airlines. The government is expected to announce a decision on the plan soon.
"The government's final verdict on removing the restriction on investment by a foreign airline within the existing FDI limit of 49 percent is awaited. We can confirm that there is interest from prospectives on this basis," Kingfisher said.
Two Gulf carriers told Reuters last month they have no interest in a stake in Kingfisher. Kingfisher has also opened talks with SC Lowy Financial, a Hong Kong distressed debt firm, as the airline runs out of traditional funding options.
India's airlines are likely to lose up to $3 billion in the fiscal year ending March as the industry's total debt swells to $20 billion. Five of India's top six airlines are in the red, including state-owned Air India which is operating on taxpayer-funded life support.
Kingfisher last month abandoned plans to join the oneworld alliance, which would have seen it share passengers with carriers such as British Airways and Cathay Pacific.
The Indian airline, named after Mallya's famous brand of beer, was suspended from the International Air Transport Association's account settlement system last week due to non-payment of fees.
Kingfisher said on Wednesday that the suspension was due to its bank accounts being frozen by tax authorities.
"We continue to work with the tax authorities to arrive at a solution to de-freeze our accounts as early as possible...We are also working with our bankers to realise the urgent interim working capital," Kingfisher said.
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