Kingfisher cannot pay even a month's salaries, CEO says

Kingfisher cannot pay even a month's salaries, CEO says

All operations at Kingfisher Airlines will be shut till Thursday, company's CEO Sanjay Agarwal said in a mail addressed to the employees.  Letter from Kingfisher CEO to employees

The development follows a late evening meeting between the striking engineers of the cash-strapped airline and Mr Agarwal.

The meeting ended in a stalemate, with Mr Agarwal telling the engineers that the company cannot pay even a month's salary to them.

Even as Mr Agarwal urged the striking employees to return to work, he, at the same time, also threatened to halt all operations if the employees do not join back.

On being asked for a one-on-one meeting with the company's chairman Vijay Mallya, the striking employees were told that he was not available at the moment.

Kingfisher employees have not been paid salaries since seven months.

Around 30 of the 250 striking engineers from Kingfisher Airlines were at the meeting with Mr Aggarwal at the airline’s office in Mumbai on Monday. The meeting was called by the CEO, nearly 24 hours after the engineers went on strike, in an attempt to restore normalcy after all 50 of the airline’s flights were cancelled.

The striking engineers were joined by pilots on Monday morning.

According to the Directorate General of Civil Aviation rules, flights cannot operate unless they are declared fit to fly by engineers.

The DGCA has made clear that it will not allow the airline to operate flights unless its aircraft are declared fit to fly.

Civil Aviation Minister Ajit Singh said in New Delhi on Monday: “We are not in the business of shutting down enterprises. All future action will depend on the DGCA’s status report on Kingfisher."

The DGCA, which termed the strike an "internal industrial unrest", said it believed “the management was trying to resolve the issue", and has asked Mr Agarwal to present before it a status report of the airline on Tuesday.

"There have been incidents of industrial unrest in the past where flights of Air India have been affected. So like we did then, we are monitoring the situation,” Arun Mishra, director-general of civil aviation, said earlier in the day. The airline's situation will also be discussed with the civil aviation ministry on Tuesday, he added.

“A section of employees of Kingfisher Airlines has not been reporting to work over the last fortnight and over the past two days. They have been threatening, and even manhandling, the employees who are reporting to work as usual,” Kingfisher said in a statement early today. “With a view to mitigating the impact of these anticipated disruptions, we are proactively cancelling several flights across our network for October 1, 2012.”

The airline, however, did not give further details on the cancellations.

Reuters cited a newspaper report which claimed the airline's ground staff had refused to attach an air bridge to a plane in Mumbai on Sunday, stranding passengers on board, while some engineers "beat up" an executive. The report cited two unnamed sources. However, the Kingfisher spokesperson did not reply to phones calls and text messages, Reuters noted.

The Kingfisher management, which has not paid salaries to most of its staff since March, had a meeting with employee representatives last week, but failed to give any firm assurance.

The Vijay Mallya-owned airline is saddled with bank loans of more than Rs. 7,000 crore from 17 banks, which it has not serviced since January. State Bank of India has the maximum exposure to the airline at Rs. 1,400 crore.

The carrier has already grounded most of its fleet as of earlier this year. Under the government of India’s rules, an airline needs to operate at least five planes in order to maintain its licence.

The company is in talks with domestic and private investors, including private equity firms, for a fund infusion, Mr Mallya said at a meeting of lenders last week, adding that there has yet to be a concrete plan.

The lenders’ meeting ended inconclusively, with the next meet scheduled for end-October, when the lenders will decide on the sale of Kingfisher Villa, Kingfisher House and other assets.

Lenders have asked Mr Mallya to come up with concrete plans for restarting the airline’s operations.

Last month, the government allowed foreign airlines to buy stakes of up to 49 per cent in local carriers, a long-awaited policy move lobbied for by Kingfisher and seen as providing a lifeline to the country's debt-laden operators.

While no carrier has publicly expressed interest in buying a stake in Kingfisher, Mallya told shareholders last week he was in talks with foreign carriers for investments, echoing earlier comments about potential investments, which have yet to yield any announcement.

Also last week, Mallya's United Spirits and Diageo Plc confirmed long-rumoured talks for the UK giant to take a stake in India's dominant whisky maker, a deal that could make it easier for Mallya to find funds to rescue Kingfisher. However Mr Mallya categorically said the airline could not use the proceeds of the stake sale in United Spirits to fund the airline.

According to its 2011-12 annual report, the airline’s net loss more than doubled to Rs. 2,328 crore in 2011-12 from Rs. 1,027 crore in the previous year. Its total long-term borrowings stood at Rs. 5,695 crore as on March 31, 2012, while short-term borrowings rose to Rs. 2,335 crore at the end of 2011-12.

SBI Caps has been asked to put together numbers for a plan to smoothly run operations within 2-3 weeks, but no official mandate has been given to SBI Caps.

Shares in Kingfisher Airlines traded lower for a second straight day today, falling nearly 5 per cent to Rs. 15.35.

With inputs from agencies

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