Kingfisher Airlines loses flying permit But says no ‘cause for concern’

New Delhi, VIRENDER KHAGTA
Vijay Mallya-promoted Kingfisher Airlines has lost its permit to fly after the deadline to renew the suspended licence expired yesterday. Aviation regulator DGCA confirmed the development which the debt-laden carrier has chosen to dismiss as no “cause for concern”. Experts, however, say that given its huge debts and liabilities (debts of Rs 8,000 crore and losses of a similar amount) it is unlikely that the airline would be able to convince the DGCA with a plausible action plan to bring in necessary funds for revival of operations and pay employees’ salaries soon.

According to Director General of Civil Aviation Arun Mishra, the licence lapsed after the Kingfisher management failed to provide additional details on the funding of operations and payment of salaries.

Battling huge debts, the airline was forced to ground its scaled-down operations after employees decided to strike work in October over unpaid wages. The series of revival plans that the management submitted since then has obviously failed to find favour with the civil aviation regulator. The Airlines submitted third revival plan on December 24 but the aviation regulator found it unconvincing and demanded reassurances from the company besides setting several preconditions.

Officials say the DGCA has asked the airline to clear employees’ dues in one go before being allowed to resume its operations. It has also demanded a letter of financial commitment from the UB Group and Kingfisher on investments.

The airline said there was no “cause for concern” as the rules allowed for renewal of a permit within two years of its expiry. “Despite the impending expiry of its licence tonight (Monday), there is no cause for concern as the regulations permit licence renewal within two years of expiry. Kingfisher Airlines is confident of securing approval from the DGCA on the restart plan, licence approval and reinstatement of its AOP,” it said. However, with every passing day it would become more and more difficult for the airline to resume operations again. Plagued by high ATF costs, fierce competition and price wars, Kingfisher owes money to almost everyone in the business – banks, airports, fuel suppliers and staff. Even though it has been looking for a foreign investor, the attempts have proved unsuccessful.

Though the management claims that they are in talks with foreign investors, including Abu Dhabi-based Etihad Airways, experts are sceptical. They say there is no reason why any investor would take up huge liabilities without any visible gains. The lapse of the licence would be a blow to its employees, who are yet to receive salaries for many months.

While licences can always be renewed (in the Kingfisher case, it has two years to seek a renewal), it will only become more difficult with each passing day. The airline’s liabilities will rise as interest costs on loans increase. Even if it manages to fly, it would be tough to win back passengers’ faith and match fare cuts with fierce competitors who would not want the status quo to be disturbed in extremely tough economic conditions. In any case, flying again will only bring in more losses for the debt-laden Kingfisher, the experts say.

DGCA stipulations

The civil aviation regulator has asked the airline to clear employees’ dues in one go.

It has demanded a letter of financial commitment from the UB Group and Kingfisher on investments.

Mounting woes

Kingfisher owes money to almost everyone in the business – banks, airports, fuel suppliers and staff.

It has been looking for a foreign investor, but the attempts have failed so far.

Though the management claims they are in talks with foreign investors, experts are sceptical.

They say there is no reason why any investor would take up huge liabilities without any visible gains.

Related posts