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Kingfisher Airlines’ resumption in doubt

Unable to pay salaries, a condition DGCA wants met, it remains unclear when the airline can restore its services
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First Published: Wed, Oct 03 2012. 08 36 PM IST
A file photo of Kingfisher Airlines CEO Sanjay Aggarwal. Photo: Sunil Saxena/Hindustan Times
A file photo of Kingfisher Airlines CEO Sanjay Aggarwal. Photo: Sunil Saxena/Hindustan Times
Updated: Wed, Oct 03 2012. 11 41 PM IST
Mumbai/New Delhi: Vijay Mallya’s Kingfisher Airlines Ltd may not be able to resume flights on Friday after a four-day shutdown with the carrier’s chief executive officer (CEO) saying that it needs another 20 days to pay salaries, one of the conditions that the aviation regulator wants the carrier to meet before its planes take to the air again.
Tempers ran high at a meeting that CEO Sanjay Aggarwal had with employees in Mumbai on Wednesday, when he told them that the carrier would need that much time to pay salaries. Aggarwal walked out of the meeting with some 900 employees after being booed for not answering questions to their satisfaction, said an airline official, who declined to be named.
“It did not go well,” this official said. “The message to the CEO was loud and clear—‘we couldn’t care less, we need our salary’.”
A senior pilot, who also attended the meeting, said the lockout, which is supposed to end on Thursday, will be extended into an indefinite shutdown and employees will be blamed.
Aviation minister Ajit Singh said the Directorate General of Civil Aviation (DGCA) has asked Kingfisher Airlines for information on its status before restarting operations.
“DGCA has asked for two reports,” Singh said. “Firstly, the airline requires to submit a detailed report on aircraft maintenance as the certifying engineers are on strike since Sunday.”
Safety of passengers was the paramount concern, he said.
“Also, the airline has resorted to sudden cancellations of flights inconveniencing passengers. Therefore, the airline will have to give us a revised schedule and its plan to stick to the same. This will include the details of the payment of salaries to its staff,” the minister added.
Director general of civil aviation Arun Mishra said he won’t allow operations until he’s satisfied with the airline’s ability to ensure safety.
“We have asked them to submit a plan about how are they going to operate as per our safety requirements,” Mishra said, adding he hasn’t specified any timeline for a status report. “They have shut the airline. The ball is in their court. If and when they have a plan to fly, it has to be to our satisfaction.”
The airline stopped flying after clashes among staff on Sunday as some employees sought to stop colleagues from operating services over the unpaid salaries. This led to passengers getting stuck in planes for as long as three hours. Kingfisher then declared a lockout.
The airline, which hasn’t paid its employees since March, is labouring under a debt burden that has forced it to keep planes on the ground and slash flights. Debt as of 31 March was Rs.5,695 crore and it had accumulated losses of Rs.7,262 crore from fiscal year 2008-09 to June 2012.
Kingfisher’s temporary “holding plan” calls for a little over 100 flights a day with 20 planes. As of Sunday, it was down to 70 flights a day with 10 planes, compared with 570 flights with 78 planes in 2008. The airline has stopped ticket sales till 7 October.
The carrier faced the prospect of an operational shutdown, possibly temporarily, unless there was an investment of approximately $600 million (around Rs.3,140 crore today) in the next 30-60 days, and access to a further $400 million over the next 12-18 months to fully fund its business plan, consulting firm Centre for Asia Pacific Aviation said in an August report.
Employees met Aggarwal on Wednesday after he invited them for a meeting at 1pm, but some engineers stayed away. However, the senior management of the airline convinced engineers and pilots to attend a discussion later in the afternoon.
But there didn’t appear to be any change regarding the key issues at that meeting as well, with some participants saying getting paid may take even longer.
“In the evening meeting, Aggarwal did not give any assurance to us,” said a senior executive in the engineering department. “Aggarwal indicated that the company will not be in a position to pay us in the next four months.”
The management sought a police presence during the meeting with the employees, which is an indication of the hostility between the two sides, said one of the persons cited above. According to him, the brusque tone of the email sent by the CEO indicated that this was “the end game for the airline”.
He also said that the employees have formed two associations—the Kingfisher Airlines Pilots’ Association and the Kingfisher Airlines Engineers’ Association—in order to push their demand to be paid.
A senior Kingfisher Airlines director said, however, that Mallya is committed to save the carrier. This may involve foreign direct investment by an overseas airline, recently allowed by the government to the tune of 49%.
“The government has recently relaxed the foreign direct investment guidelines recently,” said the director who did not want to be identified. “The airline cannot create miracles. Mallya cannot come up with a quick plan as he is in talks with multiple investors.”
He said the airline has no plans to shut down. Mallya is expected to return to India from overseas later this week.
Aggarwal is likely to meet employees in Delhi and Bangalore on Thursday, and in Chennai on Friday. He will also submit a revised revival plan to DGCA when he is in Delhi, said one of the persons cited above.
“I think the only hope for Kingfisher Airlines is a deal in which the current owner agrees to both cede control and inject more capital from his other businesses,” said Craig Jenks, head of New York-based Airline/Aircraft Projects Inc., a firm that is actively involved in strategic work for both airlines and governments.
He was referring to talks between Mallya’s United Spirits Ltd with Diageo Plc over a stake sale. Kingfisher Airlines has said it’s in talks with foreign airlines and domestic investors, without disclosing any names.
Jenks said that any investor would have to engage in a major recapitalization exercise for Kingfisher Airlines. “Maybe with some negotiation to partially alleviate debt,” he added.
A Kingfisher Airlines spokesperson declined to comment.
The stock ended at Rs.14.60 on BSE on Wednesday, down 4.89%, while the 30-share Sensex index rose 0.24% to close at 18,869.69 points.
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First Published: Wed, Oct 03 2012. 08 36 PM IST