Mumbai: Grounded carrier Kingfisher Airlines Ltd has paid its employees salaries for the month of May, according to two senior executives of the airline. Salaries for the month of March were cleared on 25 October and of April on 31 October.
According to the settlement reached earlier, employees were to be paid April salaries by 31 October and May salaries by 12 November. Salaries for the months of June-September will be paid once the company has been recapitalized. And from October onwards, the company will pay salaries a month late, which means the October salary will be paid by the last week of December.
The employees of Vijay Mallya-controlled Kingfisher Airlines, largely engineers and pilots, who had resorted to indefinite strike starting 1 October, resumed work on 25 October after reaching a settlement on disbursement of salaries.
The Directorate General of Civil Aviation (DGCA) had asked the airline on 5 October to demonstrate why its permit to fly should not be suspended or cancelled for failing to establish a “safe, efficient and reliable service” and gave it 15 days to submit a reply.
Kingfisher had previously grounded flights until 25 October. The regulator last week rejected Kingfisher’s winter schedule, prompting speculation that flights will continue to be grounded past the deadline. The airline flew 2,930 flights a week in the winter schedule last year.
The suspension of the licence of the airline will only be revoked once the airline submits a comprehensive revival plan before the regulator.
On 26 October, Mint had reported citing Kapil Kaul, chief executive officer (South Asia) at consulting firm Centre for Asia Pacific Aviation (Capa), that Kingfisher Airlines needs more than $1 billion to fully fund a turnaround business plan. The immediate requirements to actively re-launch the airline—as opposed to operating a skeleton fleet of five aircraft—have also increased from an earlier $600 million to closer to $700 million, Capa said.
Kingfisher Airlines has $2.5 billion of liabilities, of which $1.1 billion is bank debt. Banks may be able to recover some of their loans depending on the quality of the collateral in place, but this is likely to be a long-drawn process and risks are inevitable, Capa said in a recent report.
The remaining $1.4 billion of liabilities to vendors and employees is largely irrecoverable except for some secured debt where airport operators and oil companies hold bank guarantees that could be invoked.
The airline is looking at resuming operations by the third or fourth week of November, if the regulator revokes the suspension of its licence and allows it to fly.
On 9 November, Diageo Plc, the world’s largest distiller, had agreed to buy a majority stake in Mallya’s United Spirits Ltd for a total consideration of Rs.11,166.5 crore, offering the Indian liquor tycoon a way out of mounting debt woes even as it gains a strong presence in the Indian market.
To be sure, this deal will not directly help Kingfisher Airlines.
In a conference call on 9 November, Mallya said it would be “unfair for me to comment now what this deal means to Kingfisher”.
“I am doing what is best for my businesses,” Mallya said. “I believe that I have done what is best for my spirits business. I will be doing what is best for Kingfisher Airlines separately, and I would be doing (it) fairly and squarely.”