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New Delhi/Hyderabad/Mumbai: Indicating that the government is thinking of how it would deal with a worst case scenario in the ongoing crisis at Kingfisher Airlines Ltd, civil aviation minister Ajit Singh said he has asked aviation regulator Directorate General of Civil Aviation (DGCA) to “look into the legal implications" of cancelling or suspending the airline’s flying licence.

Kingfisher, promoted by billionaire Vijay Mallya, is to submit its response to the regulator as to why its licence should not be cancelled by weekend. The airline has been grounded since early October.

Singh’s move to assess the legal implications of closure or suspension are understandable because the airline owes creditors, including some state-owned banks, a substantial sum. He said the assessment would offer some clarity on Mallya’s liability—depending on whether the airline shuts down on its own or the government cancels the licence.

The minister said this was the “first time" that such a situation had come up during recent times, which is why he had sought clarity from the regulator.

A government official familiar with the matter, who asked not to be named, said the issue was being “discussed" with government lawyers though no action is envisaged till the airline sends its reply.

Kingfisher, which set benchmarks in service quality when it started, is labouring under debt of around $2 billion ( 10,620 crore today). It had pruned flights significantly at the time it suspended operations after employees, many of whom have not been paid since March, struck work.

An expert said it was unlikely that Kingfisher’s licence will be cancelled. Instead, the aviation ministry may take the less “acrimonious" route of not renewing it, he added.

“DGCA has to be reasonable, fair and equitable, and use the same yardstick for all the operators. If they cancel Kingfisher’s licence, why not Air India’s?" asked Shakti Lumba, a former vice-president at budget airline IndiGo and a former head of Air India Ltd subsidiary Alliance Air.

State-owned Air India has been kept afloat with taxpayers’ money.

Kingfisher was issued an airline licence on 26 August 2003. (This had been issued to Air Deccan, which Kingfisher took over.) This licence is valid till 31 December 2012, according to the DGCA website.

Lumba said the government can simply make the licence renewal in December conditional on the airline submitting no objection certificate (NOC) from all its creditors.

“The renewal of the licence should be subject to the operator demonstrating consistent ability of safe, efficient and reliable operations. Also, subject to an NOC from employees, oil companies, airport authorities and lessors that all pending payments have been cleared," Lumba said. “If the operator is unable to demonstrate this, then its scheduled operators permit will automatically lapse if not renewed within the stipulated period."

A Kingfisher spokesman didn’t offer any comment to calls, text messages and emails. The top management of Kingfisher is expected to meet employee representatives on Wednesday to seek an end to the ongoing labour unrest, according to two senior airline executives.

Meanwhile, it wasn’t clear whether GMR Hyderabad International Airport Ltd (GHIAL) had paid the court processing fee that would initiate the issue of a non-bailable warrant against Mallya and four other senior executives of Kingfisher Airlines by a Hyderabad court in a case regarding dishonoured cheques issued by the airline. After saying earlier in the day that the court fee had been paid, J.B. Chenna Kesava Rao, counsel for GHIAL, later sidestepped the issue.

A Kingfisher spokesperson said GMR hadn’t submitted the court fee and, therefore, no warrant had been issued so far.

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