Kingfisher Airlines plunged further into crisis after its Bangalore staff refused to attend a meeting with the management, sources said. The airline had to cancel its meetings in Bangalore and Chennai scheduled for today.
The airline’s management had committed to continuing negotiations with its pilots, technicians and other staff in a bid to defuse the crisis over non-payment of salaries since April this year.
Talks between the airline management and Delhi-based pilots and engineers on Thursday failed to resolve the standoff. Similar talks in Mumbai on Wednesday ended in what one senior pilot called a stalemate.
Lenders to Kingfisher Airlines agreed to release funds from an escrow account to keep the airline afloat, sources said. The airline needs Rs. 55-60 crore to pay salaries for two months.
An escrow account, which prevents a default in loan obligations by a company, ensures that funds received by a company cannot be accessed by it but goes directly to the lenders. After a restructuring of loans to Kingfisher Airlines in 2010-11, its lenders had taken charge of cash flows, including funds received through ticket sales.
TOO LITTLE, TOO LATE?
With about 4,000 staff, Kingfisher’s wage bill works out to approximately Rs 30 crore a month. Of the total 4,000 employees, 2,000 have received salaries until March. From April, there have been no salary payments. So while Rs 60 crore can cover payments for two months, it is unlikely to improve the situation, given that staff has demanded payment of all outstanding salaries.
Already, the government and the civil aviation regulator, Directorate General of Civil Aviation (DGCA), have stressed that the airline won’t be allowed to fly unless salary issues are settled.
There is so much that the lenders can do. In the financial turmoil of the grounded airline, its lenders stand to lose more.
About 17 banks -- led by the State Bank of India -- collectively have an exposure of Rs. 7,000 crore to the airline. That apart, the lenders together hold around a 23 per cent stake in the airline since March, after the banks converted their Rs. 6,500 crore of recast debt (after a corporate debt restructuring, or CDR, in November 2010) into equity.
Even monetizing the collaterals will not be enough to cover 10 per cent of the outstanding dues, an official at a public sector bank said yesterday.
The Vijay Mallya-owned airline and its promoters have most of their shares and assets pledged with banks, including the brand Kingfisher (pledged for a value of Rs. 4,100 crore) and two of its properties -- the Kingfisher Villa in Goa and the Kingfisher House in Mumbai, together valued at around Rs. 200 crore.
The embattled airline yesterday announced it will ground its fleet for another week after failing to resolve the impasse.
"We regret that the illegal strike has still not been withdrawn and normalcy has not been restored in the company, thereby continuing to cripple and paralyse the working of the entire airline," spokesman Prakash Mirpuri said in a statement late on Thursday.
Kingfisher Airlines extended the partial lock-out to October 12, "or up to such earlier date on which the said illegal strike is called off".
The airline has never turned a profit, has been effectively shut since Monday.
Not mincing words, Civil Aviation Minister Ajit Singh yesterday said the government was looking for concrete plans, and not status reports, from the airline on how it will operate, maintain schedule and if its aircraft are safe to fly.
In its interim report to the Civil Aviation Ministry on the crisis submitted on Wednesday, the DGCA is understood to have referred to the strike, followed by the partial lockout, and said that safety of operations has been seriously jeopardised.
The regulator is also believed to have said that non-payment of salaries was a matter of serious concern, not only for the employees but also affected safety as those seriously affected were manning flight operations.
“I don’t want to make any value judgments… my job is to make sure they follow all the safety regulations and their planes are safe,” Mr Singh said.
The whole winter schedule, including routes and landing spots, need to be looked at by the end of October and landing spots have to be considered afresh, he added.
What began as staff discontentment took a more tragic turn yesterday after the wife of an employee of the troubled airline committed suicide around 1:30 p.m. on Thursday. The suicide note found in her south-west Delhi home said her husband had not been paid for the last six months. She is also understood to be battling depression. She was found hanging from the ceiling by her neighbours and rushed to a local hospital, but didn't survive.
Susmita Chakravarti, 45, wrote a suicide note in Bengali, which says: "My husband and son are very caring and I love them. My husband works with Kingfisher where they have not paid him salary for the last six months. We are in acute financial crisis and so I am committing suicide". She also wrote that she feared her husband would lose his job.
Chennai engineers, in a strongly-worded note to the CEO earlier this week, spoke of the hardships they had to face because of non-payment of salaries and huge loans. Despite standing by the company through the dire situation, they were humiliated by the management, they added.
“We are politely trying to emphasise that we have not been paid for so many months despite high embarrassment. Due to that, we have been unable to pay back money borrowed, for the survival of our families, from banks and others. But we continued to extend our support to the company,” the letter stated.
Shares in Kingfisher Airlines dropped for a fourth consecutive day Thursday, after slumping nearly 5 per cent in each of the previous three sessions.
Last week, the Bombay Stock Exchange had halved its circuit limits on the stock, capping the maximum movement in a day at 5 per cent following a sharp rally in the share prices in the past few days.
In early trade Friday, the stock was 4.68 per cent lower at Rs. 13.65 on the Bombay Stock Exchange.
The airline’s 270 engineers went on strike on Sunday and were joined by the airline's pilots on Monday. The pilots and engineers have formed two separate associations to protest against non-payment of salaries.
Before this week, Kingfisher, once India's second-largest airline, was flying only 10 planes out of a fleet that once numbered 64.
With inputs from Agencies