This Article is From Oct 22, 2012

Kingfisher staff, management set to meet today: 10 developments

Kingfisher Airlines' turbulent flight has run into the roughest weather yet; the Directorate General of Civil Aviation (DGCA) suspended its licence on Saturday. The beleaguered airline on Friday asked the aviation regulator for more time to respond to a show-cause notice issued on 5 October asking it to explain why its flying licence should not be cancelled.

Here are the latest 10 developments

  1. Kingfisher's employees are scheduled to meet the management today in Mumbai, the first meeting after  the airline's licence was suspended.

    “We want the airline to start operations and to become viable again," a senior official, who is on strike, told IANS in New Delhi. "We will consider any offer presented by the airline which is logical and meets the minimum criterion of our demands," the official added.

  2. The DGCA suspended the licence of Kingfisher Airlines on Saturday until further notice for failing to come up with a viable financial revival plan. “The safety concerns are the most important. The DGCA does not, at this moment, think that Kingfisher can improve their financial state; the strike also, at the moment, will not stop. So after keeping all this in mind it suspended the licence," said Civil Aviation Minister Ajit Singh.

  3. In a statement after the suspension was announced, the airline said: "We would like to clarify that this is not a cancellation but a temporary suspension which 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."

  4. For resumption of operations, the airline will have to approach the DGCA saying it is ready to restart flights. The regulator will then have to ensure that the airline is ready, including preparedness of its staff to operate flights, the airline's capacity to pay for the operations as well as other safety measures, before giving a go-ahead. "Kingfisher can always come back. But they have to have a proper plan from here on; they have to improve their financial state; disgruntled employees have to be taken into confidence," said Mr Singh.

  5. The regulator had issued a show cause notice asking the airline to explain why its flying licence should not be suspended or cancelled for not providing a "safe, efficient and reliable service". It had given the airline 15 days to answer; that deadline ended today. The airline had, instead, requested for more time to do so along with a personal hearing.

  6. In a statement issued Friday, the airline said it was extending its partial lockout until Tuesday, October 23 – the third extension since striking employees brought the operations to a halt on October 1. The airline also said that it hopes to resume operations on November 6, won't be accepting any forward bookings until that day. “We had a positive meeting with employee representatives on October 17 and are hopeful of reaching common ground when we meet again next week,” according to the statement, quoting Prakash Mirpuri, the vice-president of corporate communications.

  7. The industry regulator had earlier this week rejected Kingfisher's winter schedule  and its slots will be redistributed. 

  8. Although the airline's lenders are concerned about the suspension of licence, a sale of Kingfisher's assets to recover their loans is the last option. "Recovery is the last option we are looking at as at best we will be able to recover just about 15 per cent of the total amounts from the pledged assets," an official of a public sector bank, which has an exposure of close to Rs. 500 crore to the airline, said. The lenders early this month agreed to release Rs 60 crore from an escrow account to keep the airline afloat. 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.

  9. Staff of the Vijay Mallya-owned airline have staged demonstrations, wearing black bands and carrying placards to demand speedy disbursal of their dues. The protests came after the wife of a Kingfisher employee committed suicide in New Delhi. Police said she left a suicide note in Bengali that said: “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.

  10. 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.

With inputs from Agencies

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