Kingfisher Air Suspends Flights Through Oct. 4 on Strike

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October 2, 2012

Kingfisher Airlines was once considered a very reputed and reliable Airlines and their service facilitated to passengers was appreciated around the globe. But now, the Vijay Mallya owned Company is saddled with bank loans of Rs 7,000 crore which it has not serviced since January.

October 2, 2012

Kingfisher Airlines was once considered a very reputed and reliable Airlines and their service facilitated to passengers was appreciated around the globe. But now, the Vijay Mallya owned Company is saddled with bank loans of Rs 7,000 crore which it has not serviced since January.

The Delhi and Mumbai based Airline Engineers have gone on a strike now. The reason for this strike is to pay their salaries immediately. Their salary has been stopped since seven months. The agitated engineers went on a strike protesting against the Management. This strike resulted in the delay of a number of flights.

The operational activities were also affected due to this strike. As per the aviation watchdog DGCA norms, an aircraft can't take off unless its air worthiness is certified by the airline's engineers. Services of manager-rank engineers are being used now to carry out flight operations.

“The current set of problems will make it more challenging for Kingfisher to attract investments,” said Sudip Bandyopadhyay, Mumbai-based managing director of Destimoney Securities Pvt. “Even without this strike, they would find it difficult to get funds as there are more attractive options.”

Some Kingfisher employees have stayed away for two weeks, Prakash Mirpuri, an airline spokesman, said in a text message yesterday. The striking employees include pilots and engineers, according to the Economic Times and Business Standard newspapers. Some workers on Sept. 30 refused to deploy aerobridges in Mumbai, leaving passengers stranded inside aircraft, the Mint newspaper reported, citing an unidentified person. Mirpuri didn’t answer phone calls or reply to text messages seeking further comment.

Shares Fall

The carrier, which has posted five straight annual losses, fell by its daily limit of 5 percent in Mumbai trading yesterday to 15.35 rupees, the most since Sept. 20. The stock has declined 27 percent this year, after plunging 68 percent in 2011.

Kingfisher, named after Mallya’s flagship beer brand, has slumped to sixth from second in terms of domestic market share after paring services and losing passengers. It had a 3.2 percent share in August, the lowest among six carriers.

The airline operates 15 of its 40 planes and will ramp up operations after recapitalization, Mallya said Sept. 26, without specifying a timeframe. The company is in discussions with overseas carriers about a possible stake sale, he said. The government ended a ban on such sales last month. Kingfisher has been seeking investment since at least November.

New Funds

The carrier’s founders have contributed 11.5 billion rupees ($219 million) since April 1, Mallya told shareholders on Sept. 26. The billionaire is also in talks to sell a stake in United Spirits Ltd. (UNSP), the largest distiller in India, to Diageo Plc (DGE) as he seeks cash.

In July, Kingfisher scrapped about 40 flights after some employees refused to work because they weren’t paid. The services were restored later. The carrier also delayed payments to banks, airports, tax authorities and fuel suppliers.

The airline’s planes will need to pass safety checks before services can resume, Minister Singh said yesterday. Kingfisher said in its statement yesterday that it has enough staff to safely operate its current schedule.

“If there is no certificate for airworthiness from engineers who are qualified to do that, they won’t be allowed to fly,” Singh said. “There were strikes many times earlier. This is the first time the safety issue has come up.”

Still, the government may not force Kingfisher to shut down as that’s not in the interests of banks that have lent it money, a civil aviation ministry official said yesterday in New Delhi, asking not be identified.

Creditor Talks

The airline has pledged its brand, office furniture and other assets against 64 billion rupees of debt. It is also in talks with banks and lessors after they invoked 8.4 billion rupees of financial guarantees its parent provided.

The carrier may lose its permit if its fleet falls below five planes, Aviation Minister Singh said Sept. 28. Lessors have taken back 32 planes from the airline, the Economic Times newspaper reported in June.

Kingfisher has asked banks for additional working capital loans and for more time to pay existing loans, two bankers familiar with the matter said last week. The carrier needs a capital infusion of $600 million to survive, industry consultant CAPA Centre for Aviation said in August.

Kingfisher has a long-term debt to total capital ratio of 162 percent, according to data compiled by Bloomberg. Jet Airways (India) Ltd.’s ratio is 58 percent, while discount carrier SpiceJet Ltd. (SJET)’s is at 76 percent.

Industrywide losses by India’s airlines exceeded $2 billion in the year ended March, according to CAPA. That may narrow to $1.4 billion in the current fiscal year, CAPA said.


Courtesy: Bloomberg