Kingfisher loses licence to fly

Oct. 23, 2012

Grounding Vijay Mallya-promoted Kingfisher Airlines following months of turbulence, the Directorate General of Civil Aviation (DGCA) on Saturday suspended the carrier's flying licence 'till further orders'. The order implies that the carrier cannot operate or book any flight till the suspension is revoked. Though the carrier has not operated any flight since October 1, it was planning to resume operations from November 6.

The suspension of Kingfisher licence is the third such case in the past three years. The DGCA had in 2010 suspended the licence of Chennai-based Paramount Airways. Similarly, the licence of non-scheduled airline MDLR was suspended on financial and safety grounds. None of these carriers have been able to make a comeback after that. Industry experts feel there are no chances for even Kingfisher to re-enter the market. "Their (Kingfisher's) credibility is gone. There is so much debt and losses that even if someone wants to invest, they will need over R10,000 crore and many years to recover the losses. The suspension should have come long time back when the first DGCA audit was done," said Capt M Ranganathan, an air safety expert.

The order comes a day after Kingfisher failed to submit a viable plan for its financial and operational restructuring to the DGCA. The carrier has also not been able to sort out issues with its employees, who have been on strike over non-payment of salaries.

"We were not satisfied with the response. They sought time to reply to the show-cause notice and other things; however, there is no definite time-frame that they have given to do anything," director general of civil aviation Arun Mishra told FE.

DGCA had issued the show-cause notice on October 5 to Kingfisher, seeking an explanation on why its flying licence should not be suspended or cancelled. The last day of submitting the response was October 19.

Meanwhile, civil aviation minister Ajit Singh said Kingfisher will have to satisfy DGCA about safe flight operations and also make sure that its employees are not disgruntled before it resumes services. "The DGCA has suspended the flying licence of Kingfisher Airline because of safety reasons," Singh told reporters. He said the planes of the airlines were not being maintained and serviced by their engineers who are on strike, adding, "Safety can't be compromised." Asked about allotment of Kingfisher's slot to other airlines, he said, "I presume they would be allotted to other carriers."

The suspension, however, might not hit the industry economics much. For passengers, too, no relief from high airfares seems in sight.

"Given that the cost structure of airlines continues to be high, airfares are expected to rise further, unless key states like Delhi and Maharashtra decide to cut back on sales tax on ATF and the government brings in a relief package to cut down airport charges," said Amber Dubey, partner and head, aviation, at consulting firm KPMG.

Today's suspension order has left employees and bankers jittery. While bankers are anxious to have greater clarity on the repayment of the outstandings, the employees are worried not only about their salaries, but also their future in the airline. Kingfisher employees said their fight to get their salary dues will remain unaffected. "The licence suspension does not change anything at our end," said a representative of the striking employees. "We will seek legal advice on how to extract our dues."

One of the engineers said on condition of anonymity, "To us this changes nothing. Even when the airline was flying last year we didn't get paid. We will fight for our dues and start looking for new jobs." Meanwhile, legal experts say Kingfisher could now be embroiled in arbitration, as lessors and suppliers seek to get back their dues. Chennai-based Paramount Airlines had also folded up in 2009 as lessors took back the planes leased to the erstwhile airline. Kingfisher stares at a similar fate.

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