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Kingfisher Airlines extends lockout till 12 October

Carrier still hasn’t met regulator’s terms to restart operations
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First Published: Thu, Oct 04 2012. 10 28 AM IST
The airline hasn’t paid salary to staff for seven months. Photo: Ramesh Pathania/Mint
The airline hasn’t paid salary to staff for seven months. Photo: Ramesh Pathania/Mint
Updated: Fri, Oct 05 2012. 12 44 AM IST
Mumbai/New Delhi: Kingfisher Airlines Ltd on Thursday extended its partial shutdown to Friday amid an agitation by employees who haven’t been paid salaries for up to seven months.
“We regret that the illegal strike has still not been withdrawn and normalcy has not been restored in the company, thereby continuing to cripple and paralyse the working of the entire airline,” airline spokesperson Prakash Mirpuri said. On 1 October, Kingfisher Airlines had said flight operations would be suspended until Thursday.
For the carrier to resume operations any time soon, the cash-strapped carrier has to submit a revival plan that the Indian civil aviation regulator had wanted. The airline hasn’t submitted one yet, the regulator said on Thursday.
“There was no meeting today. We had asked Kingfisher Airlines to come back with its preparedness plan. They have not submitted any plan,” director general of civil aviation Arun Mishra said.
Mishra said Kingfisher needs to satisfy the regulator about the parameters that it had asked for.
“If they come up with the plan to pay their employees and plan for aircraft maintenance, they can fly the next day. We have submitted our report to civil aviation ministry,” Mishra said.
Chief executive officer Sanjay Aggarwal told agitating airline employees that he would try and ensure timely payment of future salaries, but couldn’t assure them when the seven-month backlog of delayed wages would be cleared.
Aggarwal had invited employees to meet him in the capital on Thursday for an update on the situation at the airline. Burdened by accumulated losses and heavy debt, Kingfisher has been unable to pay employees since March.
Only 30, mainly junior-level employees, out of around 500 it has in Delhi, showed up for the meeting with the CEO and nine vice-presidents. Pilots and engineers stayed away from the meeting, which took place in a hotel near the Indira Gandhi International Airport.
“He said he can’t give a commitment (on salary payments), but that he was fairly confident (that) in one week, March dues will be paid,” said one of the employees present at the meeting. The employee requested anonymity.
Aggarwal said he would speak to airline chairman Vijay Mallya to ensure “predictability in every month’s salary” in the future, said the employee. When employees insisted that all their dues should be cleared at the same time, he said he would come back with a reply after speaking to Mallya.
Aggarwal didn’t answer calls seeking comment. Mallya, who has had such meetings earlier this year with pilots on delayed payments, is travelling overseas.
After the meeting, Aggarwal rescheduled a similar meeting planned with Bangalore employees for Thursday to Friday and left for Mumbai.
A mail sent to colleagues by employees said that the meeting had “ended in failure as there was no commitment made by the management regarding payment of overdue salaries”.
“Employees demanded payment of long-pending salary prior to resuming operations. All employees expressed their keenness to resume work provided their dues are cleared expeditiously,” the mail said.
“We all are on the same page,” said pilot Vikrant Patkar, who is leading the employees’ agitation from Mumbai.
Kingfisher Airlines has Rs.5,695 crore of debt and accumulated losses of Rs.7,262 crore. State-owned banks are concerned about the crisis at the airline, which has said it would resume operations on Friday.
“None of us wants the airline to go bust. If that happens, banks will be a bigger casualty than the airline,” said an official at a bank that has lent to the airline. The official didn’t want to be named.
Lenders won’t be able to recover even 10% of their outstanding to the airline, this official said.
The Mallya-owned airline and its promoters have most of their shares and assets pledged with banks, including the brand Kingfisher (pledged for Rs.4,100 crore) and two of its properties—Kingfisher Villa in Goa and Kingfisher House in Mumbai, together valued at around Rs.200 crore. The carrier needs Rs.1,750 crore of immediate capitalization.
Kingfisher shares fell by 4.79% to Rs.13.90 on BSE Ltd, while the benchmark Sensex closed 1% higher at 19,058.15 points.
Consultancy firm Centre for Asia Pacific Aviation, or Capa, said on Thursday that Kingfisher Airlines should voluntarily shut down in order to reorganise and restructure. As it has been operating a diminished schedule over the last few months, accounting for just 3.2% of domestic market share, this would have minimal impact on capacity and fares.
“This will surely provide the airline with a greater chance of an orderly recovery, even if that remains an outside chance,” Capa said in a note.
Capa said it’s not expecting any foreign airline to invest in Kingfisher in its current debt-laden state with a crippled fleet and poor employee morale. The government recently permitted foreign carriers to invest in local carriers to the tune of 49%.
Capa estimated that a fully-funded successful turnaround of Kingfisher will require more than $1 billion, which may be a conservative estimate.
“This would involve an immediate capital infusion of $600 million (of which approximately $350 million would need to be provided by the UB Group, with the balance from the banks). The banks appear to be willing to help, in some ways they have no option, but they want to see the UB Group take the first step,” the report said.
A further $400 million would be required over the next 18 months to support growth and implement a new business plan, which could come either from a foreign airline or another financial investor, Capa said.
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. Kingfisher Airlines has not made a profit since inception in 2005.
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First Published: Thu, Oct 04 2012. 10 28 AM IST