From bad times to worse

January 02, 2013 01:06 am | Updated November 16, 2021 09:57 pm IST

Except perhaps Kingfisher itself, nobody expected the Directorate General of Civil Aviation (DGCA) to renew its Air Operator Permit (AOP), which lapsed on December 31. DGCA was evidently not impressed by the Rs. 650 crore revival package that the defunct airline submitted to revive its operating licence and restart flights in a limited way. Kingfisher also failed to furnish the No Objection certificates from the service providers, including the Airports Authority of India (AAI), to which the airline owes money. The service providers had told the DGCA not to renew the permit unless their dues were settled. The airline has not settled staff salaries either; it was the strike by the employees last October that grounded Kingfisher and led to the suspension of its licence. The loss of the permit need not necessarily mean the end of the road. The airline can get its licence renewed within two years, but it must meet all the conditions and come up with a viable turnaround plan. Kingfisher has run up a loss of over Rs. 8,000 crore, and in order to renew the licence, the DGCA has to first be convinced that the airline has a sustainable future.

For its Rs. 650 crore capital infusion plan, Kingfisher had suggested induction of funds from the UB group. This because banks already have an exposure of about Rs. 7,500 crore and are certain not to consider extending any more credit to the airline, which also owes the AAI some Rs. 250 crore. The aircraft leasing companies are also waiting to collect their dues, outstanding for a while. That leaves hardly a handful of aircraft with the airline to resume operations, and these too have to be readied for operations and certified to be airworthy. Where is Kingfisher going to find the funds to pay the salaries of employees, the dues of the service providers, the cost of repairing and overhauling its aircraft, and then generate working capital to operate its flights to a given, limited schedule? Aside from Vijay Mallya himself, the only other option is an overseas investor. Last fortnight, there was talk of an imminent deal with a foreign airline but it appears that it was all just that — talk. The prospective partner has failed to materialise. Kingfisher has also to contend with the loss of credibility among passengers. Over the years, the airline had consciously built up a brand value — ‘fly the good times’ — but to restore that feel good sentiment in the travelling public might take quite a while, if at all it is even possible. Given the present political climate, the growing emphasis on safety, and the tough positions taken by both the Union Civil Aviation Ministry and the DGCA, it does seem unlikely that Kingfisher will be able to revive its operations anytime soon.

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