Shares plunge in India's ailing Kingfisher airline

Shares in India's Kingfisher Airlines plunged Tuesday as company executives met with regulators over mass flight cancellations caused by tax officials freezing the cash-strapped carrier's bank accounts. Shares in the airline fell nearly 20 percent ahead of the meeting in New Delhi with the Directorate General of Civil Aviation (DGCA), as investors exited the stock fearing for the carrier's future. Kingfisher chief executive Sanjay Agarwal was summoned to explain when the Bangalore-based airline would restart a full flight schedule and to outline plans to help affected passengers. The loss-making carrier -- which is battling to pay creditors and staff -- is beset by difficulties caused by soaring fuel costs and high local sales taxes, as well as an intense domestic price war. Kingfisher, owned by brewing magnate Vijay Mallya, has never posted a net profit since it started operating in 2005. Mallya told the Times Now television channel late on Monday that he was determined his carrier would survive. "Closing down is not an option. It will not happen. Government does not want it to happen. It is not in national interest," Mallya said. "We have asked banks to consider our proposal to provide more working capital." Almost 40 Kingfisher flights were cancelled on Monday, including international flights to Bangkok, Singapore, Kathmandu and Dhaka, and another 30 flights were scrapped on Tuesday morning. Mallya blamed the cancellations, which have affected thousands of passengers across India, on the sudden freezing of Kingfisher's bank accounts by the tax department. "I don't deny we have taxes due... The bottom line is we requested for time to pay these dues," he said. The carrier's share price recovered slightly after its morning freefall, but was still trading down 8.6 percent by 11:30am (0600 GMT) The airline's long-term prospects appear uncertain with media reports that 50 pilots had resigned in one week -- many of them leaving to join rival carriers. The Times of India also reported that just 16 of Kingfisher's fleet of 64 aircraft are currently in operation with the other 48 grounded due to lack of spare parts. Kingfisher has said it is re-booking passengers on rival carriers, finding other Kingfisher flights and offering full refunds to stranded passengers. India's airline industry -- once a symbol of the country's economic progress -- is now plagued by high fuel costs, price wars and inadequate airport infrastructure. A quarter of Kingfisher is owned by local banks and some have refused to lend the company more cash unless fresh capital is raised. The government has ruled out any bailout package for the airline. Kingfisher posted a net loss of 4.44 billion rupees ($88 million) in the three months to December, compared with 2.54 billion rupees a year earlier. In September, it axed the low-cost Kingfisher Red service to concentrate on its full-fare business.