India's Kingfisher puts international foray on hold

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India's Kingfisher Airlines has put international expansion plans on hold as a result of weak market conditions.

Kingfisher entered the international market in September with flights between Bangalore and London Heathrow and had grand plans for expansion to more European destinations as well as to the USA and Southeast Asia.

It says in a statement following the release of poor financial results for the first half to 30 September that it has "deferred its international roll-out plans apart from one flight operating between Bangalore and London".

"Consequent to this decision, taken in the light of the global economic environment and the near recession conditions prevalent in much of the western world, there will be reduced deployment of widebody aircraft in the near term," it says.

The deferral of international plans beyond the already operating Bangalore-London service was widely expected as Kingfisher is trying to slash costs after suffering increasing losses. It has already sold off some of its Airbus A340-500 delivery positions and has said it will be slowing the induction of additional widebody aircraft in future.

It has also returned two Airbus A320s to lessors and says in its statement today that this was at "no additional cost", adding that "the company is in discussion for the return of a further eight aircraft".

Kingfisher earlier this year merged the operations of the former Air Deccan into its own and says the integration allowed it to reduce overall capacity deployment by around 4% in the first half of the current financial year. It adds that "further reductions are planned".

"The merger of the two operating airlines into one corporate entity has also enabled savings on operating costs such as engineering and ground handling, insurance and catering," it adds.

"Employee costs have also been addressed through an integration organisation which enabled the company to terminate the contracts of most expatriate staff and impose a hiring freeze on new appointments."

Kingfisher also says a recently announced alliance with rival carrier Jet Airways should help it cut costs further. The two airlines announced last month that they planned to codeshare, interline and share resources in many other areas, although the partnership does not include equity links.

"The recent discussion between Kingfisher Airlines and Jet Airways is expected to help both carriers to significantly rationalise and reduce costs by offering a unique high quality product with improved standards of service to customers."

Kingfisher also says it is more upbeat about its earnings prospects for the second half of the financial year due to a "further expected drop in fuel prices".