Kingfisher crisis: Aviation regulator DGCA suspends flying licence

Aviation regulator Directorate General of Civil Aviation (DGCA) has suspended the flying licence of Kingfisher Airlines for failing to come up with a viable financial revival plan.

The Vijay Mallya-promoted airline, which has not operated a single flight since October 1, had been asked to explain by today why its licence should not be suspended or cancelled for not providing a "safe, efficient and reliable service". 

But its response to the show cause notice issued by the regulator was allegedly not satisfactory. The airline had asked for more time and a personal hearing, and gave no details on a financial plan or operational plans, which is what the DGCA had asked for. 

"We were neither lenient nor hard on Kingfisher Airlines... The DGCA does not at this moment think that Kingfisher can improve their financial state. The strike also, at this moment, won't stop, so after keeping all this in mind DGCA suspended the licence," said Civil Aviation Minister Ajit Singh. (Read: Kingfisher Airlines must satisfy DGCA on safety aspects, says Ajit Singh)

"Safety cannot be compromised. The engineers, ground staff are not performing the safety checks hence there can be no middle path... Kingfisher can always come back, but they have to have a proper plan from here on, have to improve their financial state and disgruntled employees have to be taken into confidence... DGCA will decide the further course of action," he added. 

Meanwhile, Kingfisher issued a statement that said, the suspension is valid only till such time that we submit a concrete and reliable revival plan to the satisfaction of DGCA. 

"While this order is being examined, we would like to bring to your notice that the actual position has not changed because of this order. We have in any case always maintained that once the issues with the employees are resolved, we will first present our resumption plan to DGCA for review, before resuming operations," the statement said quoting Prakash Mirpuri, Vice President of Corporate Communications.

"Notwithstanding the order of the DGCA, we had in any case suspended operations and closed forward bookings till November 6, 2012. The management has already earlier communicated to all stakeholders this very position. We are now immediately suspending all forward bookings till such time we resume operations," the statement stated, adding that the airline is working towards re-starting operations at the earliest.  (Read full statement)

The airline's Scheduled Operator Permit has been suspended, which implies an immediate halt to all bookings on the entire Kingfisher network as well as through travel agents, Civil Aviation Ministry officials said. The permit would remain suspended till such time that Kingfisher submits "a concrete and reliable plan" to relaunch its scheduled operation "to the satisfaction of the DGCA", the officials added.

For resumption of operations, the airline would have to approach DGCA saying they were ready to resume operations. The regulator then would have to satisfy itself that the airline was fully prepared to fly, including preparedness of its staff to operate flights, the airline's capacity to pay for the operations and all safety measures, before giving a go-ahead.

Kingfisher was issued an airline licence on August 26, 2003. It was actually issued to Air Deccan which was bought over by Kingfisher. It is valid till December 31 this year. 

On Wednesday the DGCA had rejected Kingfisher's winter schedule; its slots will now be redistributed.    

The airline was forced to declare a lockout and suspend flight operations after its 250 engineers went on strike on September 30. They were later joined by pilots. The employees are protesting against non-payment of salaries and dues, and have said that work will resume only after all dues are paid and assurances are given that salaries will be paid on time. The airline last paid some of its employees salary in March this year; for seven months no one has been paid.

On Friday, the airline said it was extending its partial lockout until October 23.  A statement issued later said, "The management hopes to resume operations on November 6."

Several talks between the staff and the management have failed and so the impasse has continued. A crucial meeting on Thursday last too remained inconclusive. The management has offered payment of a month's salary, but the staff say that is unacceptable.

Friday's statement quoted Prakash Mirpuri, Kingfisher's vice-president of corporate communications, as saying, "We had a positive meeting with employee representatives on October 17 and are hopeful of reaching common ground when we meet again next week."

Shares in Kingfisher Airlines dropped 4.8 per cent on Friday ahead of the October 20 deadline to respond to the civil aviation authorities. The DGCA had told the airline on October 5 to demonstrate why its permit to fly should not be suspended or cancelled for failing to establish a "safe, efficient and reliable service", and gave it 15 days to reply.

The airline currently has only 10 operational aircraft compared to 66 planes a year ago. It is reeling under a $1.4 billion (Rs. 7,524 crore) debt and has accumulated operating losses of Rs. 8,000 crore.

Earlier this month, lenders to the airline earlier this month agreed to release Rs. 60 crore from an escrow account to keep the airline afloat. 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 the restructuring of loans to Kingfisher Airlines in 2010-11, its lenders had taken charge of cash flows, including funds received through ticket sales. The airline needs Rs. 55 to 60 crore to pay salaries for two months.

With inputs from Press Trust of India