Kingfisher’s labor issues add to debt woes

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Published: July 4, 2012

Kingfisher Airlines A320. Courtesy photo

Kingfisher Airlines (IT) is facing more trouble this week as management failed to convince pilots theywill be paid (ATW Daily News, April 3). The pilots went on strike Sunday over nonpayment of salaries since February.

Labor troubles are the latest woes for the carrier, which has a debt of close to $ 1.4 billion. IT has responded to cash-flow problems by shrinking operations substantially. It operates between 13 and 15 of the 43 aircraft in its possession. About 23 aircraft have been sent back to lessors or repossessed over the past 12 months, according to sources in the aircraft re-insurance business.

There has been no statement from the company on its exact fleet status, but industry sources say it is now left with Airbus A320s, three A330-200s and ATR-72s. Spares from the planes are being cannibalized to operate the remaining aircraft. The A330s have been a major drain on finances for about two years, as IT has been unable to operate them profitably. Its share in India’s domestic market shrunk to 5% in May. Before the pilot’s strike, IT was able to maintain a reduced schedule of about 100 flights a day, but more flights had to be cut July 3 because of the pilot’s strike.

IT lenders, mostly government-owned banks, have formed a consortium to try and recover their money. The group will meet with chairman Vijay Mallya and the airline’s management July 5 to decide on the next course of action. In the last meeting, theypushed Mallya to bring in equity to revive the carrier. He has been pinning his hopes on the Indian government allowing foreign airlines to invest in Indian carriers. However, a decision allowing foreign airlines to take up to 49% equity has not yet been confirmed.

The banks have stopped lending to IT, putting the airline in a very precarious position. It has already been thrown out of IATA’s Billing and Settlement Plan and is defaulting on payments to virtually all major vendors. Mumbai airport operator MIAL has gone to court to recover its dues from the airline. Other creditors say it is a matter of time before they do the same.

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