Does the Directorate General of Civil Aviation’s (DGCA) decision to temporarily suspend the licence of Kingfisher Airlines until it comes up with a concrete and reliable revival plan mark the end of the road for the company? Assuming that the airline does come up with such a plan in the next couple of weeks, the DGCA and Civil Aviation Ministry will still take their time to review the airworthiness of the now limited fleet of aircraft available with Kingfisher and also assess the financial viability of the airline before renewing its licence. On the airline management’s part, negotiations with striking employees will continue in search of an evasive settlement. With their pay several months in arrears, how can employees be expected to resume duty with the offer of a month or two’s salary? Now that virtually all domestic financing options have been exhausted and lenders are working on properties they can attach, Kingfisher is hoping foreign investment will provide it some muscle to revive operations. The Airports Authority of India has made it clear that it will not allow anybody else to lay hands on the aircraft, which are being stripped of their vital parts. Unless its promoter Vijay Mallya manages to pull another rabbit out of his hat, this really looks like the beginning of the end for the high profile airline.

In the normal course, and given the facts of the case, there are minimal chances of survival for Kingfisher since it suffers from “terminal illness.” Though Air India may be in very much the same condition, it survives because it is government-owned and much of its sickness comes from the government's own mismanagement of the airline over the years. Till now, Mr. Mallya has tried every trick to save his airline. Many shares of United Breweries Holdings — the flagship company of his group — and property development assets have been pledged to keep the banks happy. And yet the airline has run up accumulated losses of over Rs. 8000 crore and debts of about Rs. 7000 crore. Kingfisher owes huge sums to the AAI, the oil companies, the consortium of banks, and above all, has not paid salaries to a vast majority of its staff. Where can management possibly find the resources to meet these commitments and then resume operations? Though the Centre has allowed foreign direct investment in airline companies up to 49 per cent of equity, the fact is that given its precarious financial condition there may not be any suitor for Kingfisher. About the only valuable assets that it can claim are landing and take-off slots at major airports across the country along with parking rights. They are still not attractive enough to compensate for the liabilities that will come along.


Kingfisher staff refuse to accept salary offerOctober 22, 2012

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