End of the road for Vijay Mallya's Kingfisher Airlines?

End of the road for Vijay Mallya's Kingfisher Airlines?

The shutdown of cash-strapped Kingfisher appeared inevitable as the Directorate General of Civil Aviation has summoned the airline's top management to Delhi on Tuesday despite it being a national holiday.

The Kingfisher dream has all but ended. Faced with one more crisis compounding its agony - growing safety concerns following a strike by its engineers - Kingfisher Airlines declared a partial lockout late on Monday night.

Pushed into a corner by a string of troubles, Vijay Mallya, chairman of Kingfisher Airlines told MAIL TODAY : "This (the partial lockout) was necessitated because of the intolerable violent behaviour by a section of the staff against all those who want to work."

The airline said the action by the employees who had "regrettably chosen to take law into their own hands forcing a complete paralysis of operations were all unnecessary and unprovoked. It has been decided that flight operations will be suspended for the next three days, that is until October 4".

The decision came hours before the Kingfisher brass was scheduled to meet aviation regulator Directorate General of Civil Aviation (DGCA) even as the government adopted a tough position against the beleaguered airline saying pulling the curtains on it was a distinct possibility.

FULL COVERAGE: Kingfisher crisis

The shutdown of the airline appeared inevitable as DGCA has summoned the airline's top management to Delhi on Tuesday despite it being a national holiday on account of Mahatma Gandhi's birthday.

Civil aviation minister Ajit Singh said: "The DGCA has called the Kingfisher management on Tuesday as the matter is now grave. DGCA will seek an update from the airline on whether it is genuinely feasible to continue."

Earlier on Monday, in what was a major jolt to billionaire Mallya, Singh issued a stern warning saying: "I will not hesitate to shut down Kingfisher Airlines if there is any question of it being a safety hazard."

As the airline struggled with safety issues following a strike by its engineers, Singh told MAIL TODAY : "There can be no compromise on safety of air passengers; their safety is paramount. We had asked DGCA for an airworthiness audit, at that time things were okay. This was one week back," he explained.

"But, now the engineers have struck work, the airworthiness cannot be certified and it is a matter of concern. It is a free market and passengers have to decide themselves, but my concern emanates from the engineers' strike, for this puts the airline in peril. Issues between pilots and management are internal issues and I don't want to comment on that. I am talking from a safety standpoint," the minister said.

On Monday as many as 50 flights were cancelled with pilots joining the striking engineers to protest the non-payment of salaries for the last six months.

According to norms set out by aviation regulator DGCA, an aircraft can't take off unless its airworthiness is certified by the engineers.

Meanwhile, Kingfisher shares slumped 4.78 per cent in the Mumbai stock exchange soon after the opening of trade to touch the lower circuit limit of Rs 15.35 on the Bombay Stock Exchange.

Aviation sector expert Jitendra Bhargava said there is no future for Kingfisher Airlines. "The airline should have been closed by now. Mr Mallya comes from a liquor business industry which has a huge margin of 35 per cent, but airlines have a thinner margin of around 2 per cent. He followed a wrong business model. The airline earlier said it will focus on the upscale market. They could not understand the economics of the sector and never took necessary corrective action," he said.

In Mumbai, a team of engineers and pilots had a meeting with executive vice-president of Kingfisher Hitesh Patel who, according to the employees, said it would be difficult to pay salaries till some restructuring happened and new investors, including foreign ones, showed interest.

Kapil Kaul, CEO, Indian Subcontinent & Middle East of the Centre for Asia Pacific Aviation (CAPA), an aviation think tank, said the labour unrest at the bedevilled airline is on expected lines and the government should look at temporarily closing down its operations so that it can restructure and reorganise itself.

"But who decides on it, the government or the promoter (KFA) that has to be seen. We had already predicted that the airline would be shut down soon. I think the government should decide on its closure soon. The labour unrest has been on expected lines. Rather, it has been a peaceful one. They have not been paid for the past seven months," Kaul said.

"The airline needs a strategic investment of not less than $600 million from banks. Only then can we expect some international airline to invest in Kingfisher. But that is not happening," Kaul added.

Kingfisher has been saddled with a huge loss of Rs 8,000 crore and a debt burden of another Rs 8.037 crore which it has not serviced since January. These have been categorised as bad loans by banks.

Several of its aircraft have been either taken away by its lessors or grounded by the Airports Authority of India for non-payment of dues during the past few months.

Courtesy: Mail Today

Published on: Oct 02, 2012, 11:32 AM IST
Posted by: Gaytri Madhura, Oct 02, 2012, 11:32 AM IST