New Delhi Wants Kingfisher to Fly

For Kingfisher Airlines, 2012 ended on a sour note: it lost its license after it failed to convince the government that it has enough money to start flying again.

Its license to fly in India expired on Dec. 31. The question is how fast the cash-strapped carrier can hope to get it back.

The government says it’s open to make this happen fast. “Kingfisher can still apply for the same license and the procedure won’t be very lengthy. We wouldn’t want to shut the airline down. It just has to satisfy us with a proper revival plan and it will get the license back,” a senior official at the civil aviation ministry told India Real Time.

This means that Kingfisher can skip a lengthy application procedure. However, it will still have to convince India’s airlines regulator that it has a strong plan to revive its fortunes before it’s allowed to fly again.

India’s aviation regulator first announced the suspension of the airline’s license on Oct. 20. This came after Kingfisher employees, who had not been paid since March, stopped going to work.

Kingfisher isn’t in a much better place now. While it has paid salaries for the months of March to May, the company still hasn’t paid salaries for the months of June to December, according to three of its employees.

“Our May salaries only came on Jan. 3 and Jan. 4, while they were supposed to come by the middle of November,” said one of the employees.

Kingfisher’s spokesman Prakash Mirpuri was unavailable for comment. Earlier, Kingfisher has said that salaries for June to September would be paid once the airline manages to raise funds. Kingfisher told the aviation ministry it has pending salaries worth 1.2 billion rupees ($21.82 million.)

But salaries are just part of the problem.

Kingfisher is also facing pressure to return five leased planes due to non-payment of rentals, one of the employees said. But the airports where the planes are parked don’t want to let go of them until Kingfisher settles its payments with them as well, he added. As of late October, Kingfisher owed 3 billion rupees to the state-run Airports Authority of India, and more than 1 billion rupees to the privately-run Delhi and Mumbai airports.

“Serious recapitalization continues to remain an outstanding issue and is critical for any meaningful revival,” said Kapil Kaul, chief executive, south Asia at CAPA-Centre for Aviation.

Kingfisher has said it will need 6.52 billion rupees a year to pay salaries, refurbish planes and fund operations.  It plans to initially start limited operations with five Airbus planes and two ATR turboprop regional aircraft.

The airline has said the money will come from its parent UB Group but the methods of payment are still unclear to the government.

At the same time, it requires additional funds to at least partly reduce its debt of about $2.5 billion to save on interest payments.

Kingfisher is in a race with rival Jet Airways (India) Ltd. to sell a stake to Etihad Airways.

Although, Kingfisher would be valued less than Jet, its problems would make it a potentially less attractive player than Jet for the Abu Dhabi-based carrier.

Source:    http://blogs.wsj.com