Caught in a pincer: Time ticks for Kingfisher, shares plunge
The next few days would be critical for Vijay Mallya-led Kingfisher Airlines (KFA), after the country's largest bank, the State Bank of India, declared its loans as non-performing assets. Tushar Srivastava reports. A laundry list of troublesindia Updated: Jan 07, 2012 01:58 IST
The next few days would be critical for Vijay Mallya-led Kingfisher Airlines (KFA), after the country's largest bank, the State Bank of India, declared its loans as non-performing assets (NPA) - which is industry shorthand for bad loans that yield no interest.
As the clock ticks, KFA has time until Monday to respond to hard questions on safety and capacity from aviation regulator DGCA (Directorate General of Civil Aviation), which, after a financial audit of airlines, found that there was a reasonable case for withdrawal of KFA's airline operator permit, government sources said.
The regulatory trouble and the banking problem together hurt the airlines shares that closed down 4.9% at Rs 19.45 on Friday. "This means that the financial restructuring plan prepared by SBI Caps has not been accepted.
This also means further assistance from these banks is ruled out. And that is a real bad news," said Kapil Kaul, South Asia CEO of Centre for Asia Pacific Aviation, an aviation consultancy firm.
Kingfisher has been seeing an exodus of pilots and stewardesses and its flight schedules have gone haywire, while it faces criticism against a possible government bailout.
"When they were making profits they did not share it with the government. Public funds should not be used to save a private entity," said Captain Mohan Ranganathan, an aviation safety expert.
According to DGCA documents accessed by HT, KFA has been directed to immediately assess its fleet requirement vis-à-vis manpower and spares to maintain a minimum number of aircraft operational for safe operations.
The airline must align its flights with operational aircraft availability, and must indicate firm timelines for recovery of grounded aircraft. It also has to spell out timelines on availability of spare parts to maintain its jets.
"The airline can reply by the end of working hours (6 pm) on Monday with a detailed recovery plan and addressing all issues raised by us including salary of its employees," a source said.
The most serious observation made in the KFA audit is that out of a fleet of 64 aircraft, 20 are grounded due to want of spares, engines and components. HT had first reported on November 12 that more than 20 KFA aircraft were grounded.
First Published: Jan 06, 2012 23:29 IST