Kingfisher chairman to meet aviation regulator amid doubts over survival
"If DGCA gives a report that safety cannot be assured certainly we will take action. We can cancel their license," he said.
Vijay Mallya has been summoned to meet the Directorate General of Civil Aviation (DGCA) chief E K Bharat Bhushan today, amid reports that the aviation regulator might consider cancelling the operating permit of his cash-strapped Kingfisher Airlines. Mallya said that he would explain the situation to him.
"We will explain our situation to him and hope he would understand," Mallya said ahead of the meeting.
The DGCA has sought an explanation from Mr Mallya on how he his plans to revive his airline, which is operating a depleted strength of its scheduled flights, leaving many passengers in the lurch every day with unannounced cancellations. Today's meeting is expected to decide whether the airline’s troubles have cruised past a point of no return. A final DGCA recommendation to the government on Kingfisher is expected after the meeting.
“It is a completely difficult situation which cannot go on like this,” Bharat Bhushan told NDTV in an interview. (Read: Kingfisher Airlines' situation cannot go on like this, says civil aviation regulator)
The DGCA has the authority to suspend or cancel the airlines license, and is finalising its report on Kingfisher this week.
Kotak Securities, a Mumbai-based stockbroking firm, said that the company is unlikely to restore operations.
“In view of the cash-flow problems being faced by the airline, it is unlikely that the airline would be able to restore operations,” the brokerage said in a note this morning to its clients.
The company’s market share is now below 5 per cent at 100 flights a day. “A fleet of 16 aircraft means that market share of the airline would have slipped to mid-single digit from 12 per cent in January 2012,” Kotak Securities adds.
Kingfisher Airlines was served a show-cause notice late last month on why its licence should not be suspended after days of flights being cancelled and reports that it was unable to pay its employees.
Kingfisher's finances are in a shambles and its inability to pay airport dues has prompted the Airports Authority of India (AAI) to ask for advance payment for each aircraft that takes to the air. The service tax department has threatened to take the airlines to the court over dues not being paid.
There are other challenges.
Reuters adds: Kingfisher Airlines was hit with a regulatory challenge after the last of its independent directors quit amid growing concerns about the struggling carrier's survival. Anil Kumar Ganguly resigned from the company's board of directors due to ill health over the past few months that prevented him attending normal activities, Kingfisher Airlines said on Monday.
The latest resignation comes less than a week after another member, Vijay Amritraj, quit the board of Kingfisher. The company had cited an increase in Mr Amritraj's travel schedule and other commitments for the resignation.
Mr Ganguly's resignation had left Kingfisher without an independent director on its board, which, analysts said, violated the market regulatory norms for listed companies and it would have to bring some independent members on the board at the earliest to ensure its operations are not impacted.
The company has been left with three board members - Vijay Mallya, vice-chairman Subhash Gupte and the carrier's parent chief financial officer Ravi Nedungadi, according to the company website.
Kingfisher, which has a debt of $1.3 billion, is facing near collapse as banks have so far refused to lend it more for day-to-day operation and massive cutback in flights have reduced revenues, leaving the carrier with little cash to pay its employees, airports and tax authorities.
The carrier, controlled by flamboyant liquor baron Vijay Mallya, has almost halved its daily flights from the scheduled 200 after some pilots refused to report for work and a suspension by global industry body IATA from its settlement system restricted bookings through overseas agents.
Kingfisher will have a full recovery plan in place in two to three days that will address its financial issues and restore dozens of flights, Mr Mallya had said last Thursday.