Kingfisher loses operating licence

Two months ago, the Centre for Asia Pacific Aviation (Capa) had predicted the grounding of India's Kingfisher Airlines. Yesterday the Directorate-General of civil aviation (DGCA) suspended licence of the airline, to put its survival under a cloud.

The move came three weeks after Kingfisher declared a lockout in the wake of a number of its employees strike to the payment of the salaries of the long-term compliance with the hand.

The DGCA has said that the licence will be suspended until the airline is able to put together a plan on credible revival. On 5 October, had the DGCA issued a Show-cause notice to the airline to ask why its licence should not be cancelled.

The airline had been given 15 days to respond, and this period ended today.  In response to the announcement, KFA had said that the unrest of the worker is not under their control, which the regulator found unsatisfactory.

The planned operator allowing the airline is suspended until further orders, confirmed officials from the Ministry of civil aviation. This means that all bookings on the airline network and via travel agencies immediately be halted.

Civil Aviation Minister Ajit Singh said that Kingfisher will have to comply with the DGCA on safe flight operations and also ensure that its employees are dissatisfied before it resumes its services.

He said the aircraft of the airlines were not maintained and served by their engineers who were on strike. "Security cannot be compromised," he added. Asked about the allocation of the Kingfisher lock on other airlines, said Singh, "I assume that the slots would be allocated to other airlines."

Capa, who regularly follows the developments in the region aviation sector, had the financial situation of the KFA since December 2011 described as "quite alarming". An expert report Capa had questioned how long KFA can continue to survive on the unusual compassion shown by a large number of benign lenders-a consortium of 17 banks and institutions led by State Bank of India.

In the Capa's estimation, the near bankrupt airline have been mounting debts on 13,460 crore rupees at an alarming rate in the past 18 months. It will have to finance the turnaround almost 5,380 crore rupees in the near future. (A crore equals 10 million.)

The airline has insisted that a possible turaround in sight. The basis for the claim is ongoing discussions with foreign companies that it claims, Kingfisher policy decision of the Government to allow 49 percent after have expressed an interest in the domestic aviation sector FDI.

The KFA-management, however, is never even to his lenders that the likely off-shore investors are provided.

After KFA was forced to drastically cut his daily schedule of the flights, the daily operational losses ranged between 6 crore and 8 crore rupees.

The airline was floated in 2005, but the carrier has not even high-profile showed a profit. The crisis snow-balled once lenders confidence took a knock.

A few days ago, as Kingfisher extended lock-out in the company until October 23, the regulator rejected its winter schedule that power of 5 November was expected.

Capa had predicted "only a remote chance of recovery given its huge debt, paralyzed fleet and poor employment morality." The monthly wage mass of almost 4,000 employees, according to the Agency, is 30 crore rupees.

Only 50% of the employees were paid salaries until March 2012. The recent offer by the 17-member lenders consortium to 60 crore rupees from blocked account to pay striking engineers, pilots and ground staff would help arrange barely two months dues, said CAPA.

The lenders SBI guided now facing the possibility of a large write-off under the debt restructuring arrangement plan because they had agreed to in November-December 2010, banks and financial institutions in a 23 percent equity interest that they now jointly hold about 6,500-crore rupee debt rescheduling.

SBI, the biggest lender to 1,500 crore rupees, Kingfisher had already under the head of the Non-Performing assets in the books of account. Three months ago, a consortium member, ICICI Bank, sold its obligations for about 500 crore rupees and walked away, as it saw signs of Kingfisher is grounded for good.