Corporate Dec 31, 2012
New Delhi: Kingfisher Airlines' scheduled operator permit (SOP), or flying licence, could lapse today unless it convinces aviation regulator director general of civil aviation (DGCA) about its revival plan.
But the lapse should not be the cause of any immediate worry since DGCA sources say it can be renewed anytime within the next two years.
Still, lapsing of the licence would mean a huge blow to the morale of the airline's employees, already suffering due to large salary backlog.
Kingfisher has not operated a single flight since 1 October this year when its engineers refused to certify aircraft, citing huge salary backlogs.
Top sources in DGCA told Firstpost on Saturday that the airline has been asked to furnish many more details, its sketchy revival plan has not really given confidence to the regulator.
"We have asked Kingfisher to provide written proof about where the funds will come from. It has promised Rs 652 crore infusion but if this is to come from the UB group, we need some proof since UB and Kingfisher are separate entities," these sources told Firstpost.
Also, the regulator has raised questions about payment of dues by the airline to its lenders, airport developers and oil companies.
"We need clear answers to these questions and also want clarity on aircraft operations - whether the airline has enough spares-since this was a problem in the past," the sources said.
Interestingly, the airline's top brass has not mentioned any strategic investor's role in the revival plan in its meetings with DGCA over the last fortnight.
"They have said nothing about a strategic investor. They have made no mention of any deal, not even with Etihad," sources said.
They also made it clear that once DGCA's queries in funding, vendor dues etc are answered, the regulator would hold several meetings with stakeholders - primarily Airports Authority of India (AAI) and other airport operators - before renewing Kingfisher's permit.
Last week, Kingfisher airlines had presented a revival plan which promised:
1) Promoters will infuse Rs 652 crore into the airline but over the next 12 months. Of this Rs 120 crore has been earmarked for employee dues. The airline said lender banks are unwilling to extend any more loans so all this money will come from the parent, UB group. Apart from salaries, a major portion of this Rs 652 crore will be used for refurbishing aircraft.
2) Kingfisher denied having any dues with oil companies except some "interest dues" with HPCL. It has also clarified that payments of any dues will be outside the Rs 652 crore earmarked for operational revival.
3) To begin with, the airline will put 5 Airbus 320 and 2 ATR aircraft to use. In a meeting with lenders a few days ago, Kingfisher Airline officials had said they would be able to ramp up operations to 21 aircraft within a couple of months of getting DGCA permission to fly. Today's plan speaks of getting 10 A320s and 11 ATRs up and running within 10 weeks.
4) Kingfisher will require six to eight weeks to begin operations. The revival plan also speaks of paying employees two months' salary (salary and arrears) each month once operations actually start. From DGCA's pointed queries on revival funding etc, it becomes clear that the airline needs to get its act together before it will get the flying permit reactivated. Meanwhile, Chairman Vijay Mallya is believed to have held extensive discussions with Etihad for offloading minority equity stake in Kingfisher to the Abu Dhabi carrier, while also relinquishing management control. But industry sources tell us that Etihad has made it clear it will not shoulder Kingfisher's debt and other liabilities. Debt alone stands at over Rs 7,000 crore.
A story in the Times of India on Friday said Kingfisher owes the Airports Authority of India (AAI) Rs 300 crore. AAI is clear that Kingfisher cannot be allowed to restart operations unless it first clears these dues.
Speaking to Firstpost earlier, airline employees had said that though submission of the revival plan is good news, it may be end January before the airline actually begins to fly-if DGCA allows it to - and another four weeks before any kind of operational schedule is arrived at. "Passengers need to be sure that they can trust the airline to maintain its schedule. This building of trust will need time. Also, the airline needs to ensure it takes employees along if it actually wants to get back to the skies," said an employee.
Launched in May 2005, Kingfisher has never reported a profit. It has bank debts of more than Rs. 7,000 crore and unpaid interest since January apart from over Rs. 1,000 crore in vendor and tax arrears. It also has accumulated losses of nearly Rs. 10,000 crore, apart from the salary dues of the past eight months.
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