New Delhi: India’s aviation regulator, the Directorate General of Civil Aviation (DGCA), has deregistered two aircraft in the fleet of Kingfisher Airlines Ltd following a letter from the German lessor of the planes in which it stated that payments were not being made on time.
Fund crunch: Kingfisher Airlines chairman Vijay Mallya. By Saanskrut Kumar/Mint
This is the first time since 2009 that the regulator is deregistering the plane of a national airline at the request of lessors, a move that’s considered unusual in the international lease market.
Two Paramount Airways Pvt. Ltd aircraft were removed from the aircraft registry of India in late 2009 owing to similar non-payment.
“We have deregistered the aircraft today,” a government official familiar with the matter said on Monday, following a communication from lessor KfW IPEX-Bank GmbH. “This was due to termination of the lease agreement as the airline was apparently not paying the lessors.”
Kingfisher, which has a fleet of 64 aircraft comprising Airbus A320s and short-haul ATRs, is facing a cash squeeze and has been defaulting on vendor payments and salaries.
The deregistered planes were turboprop ATRs with registration numbers VT-DKD and VT-DKE, said the official cited above.
Director general of civil aviation Bharat Bhushan has the power to deregister planes under rule 30 of the Aircraft Act, said the official.
A second government official, who also declined to be named, said the bank had recently sought that the two aircraft be not “allowed to fly” in a three-page letter marked to the aviation ministry, DGCA and the Airports Authority of India.
A spokesman for KfW confirmed “talks” with Kingfisher on the aircraft, but denied seeking any support from Indian civil aviation authorities.
“We can confirm that we have provided financing for two regional aircraft which are leased to Kingfisher Airlines. In connection with this business relationship, we are in close contact with Kingfisher Airlines,” said Axel Breitbach, director of communication and marketing, in a 25 January email. “In this context, we have not officially sought support from the Indian civil aviation authorities.”
An email sent to KfW on Monday remained unanswered. An email sent to Kingfisher also remained unanswered.
“It is the lessor’s choice to take action if the lessee is not meeting its payment obligations,” said Steve Forte, a former chief executive of Jet Airways (India) Ltd. “All lessors around the world are carefully assessing the aviation industry worldwide in case of defaults.”
Among the reasons why a lessor would want to take back planes are concerns about maintenance and safety. “It is just a hypothetical scenario, one of several, that could lead the lessor to take such action,” Forte said.
DGCA said in its December financial audit of Kingfisher that the cash-strapped airline was cannibalizing parts from aircraft, though it’s not clear if the KfW decision was a result of this report.
This is the second instance of Kingfisher’s aircraft being deregistered. GE Commercial Aviation Services (Gecas) had got three of the aircraft leased to Kingfisher deregistered in 2008 after payment defaults.
On 14 January, Germany’s DVB Bank SE said it may repossess two Airbus A320 aircraft leased to the airline due to non-payment.
“We have said to Vijay (Mallya) that we cannot continue like this. If we are not paid in due time, we will certainly consider repossession of the aircraft,” Singapore-based Borislav Bjelicic, a senior vice-president of DVB Bank, told Reuters at the time.
It remained unclear if the planes have been repossessed.
In a 25 January email, Bjelici said, “We cannot/don’t want to comment to these questions.”
Kingfisher’s stock dropped 3.53% to Rs 24.60 on the Bombay Stock Exchange. The benchmark Sensex fell 2.15% to 16,863.3 points.
tarun.s@livemint.com