Kingfisher Airlines grounded totally, all flights cancelled

In a first, Kingfisher Airlines cancelled all of its 50 flights today after engineers of the debt-laden carrier went on a flash strike yesterday evening protesting non-payment of salaries. The engineers were joined by pilots this morning.

Aircraft engineers are crucial because they certify whether the plane is fit to fly. 

The Directorate General of Civil Aviation (DGCA) will not allow Kingfisher Airlines to operate flights unless its aircraft are declared fit to fly by certified engineers, Civil Aviation Minister Ajit Singh said in New Delhi on Monday.

“We are not in business of shutting down enterprises. All future action will depend on the DGCA’s status report on Kingfisher,” Mr Singh added.

The DGCA, which termed the strike an "internal industrial unrest", said it believed “the management was trying to resolve the issue", and has asked chief executive Sanjay Agarwal to present before it a status report of the airline on Tuesday.

"There have been incidents of industrial unrest in the past where flights of Air India have been affected. So like we did then, we are monitoring the situation,” Arun Mishra, director-general of civil aviation, said earlier in the day. The airline's situation will also be discussed with the civil aviation ministry on Tuesday, he added. Shares in Kingfisher Airlines traded lower for a second straight day, falling nearly 5 per cent at Rs. 15.35.

“A section of employees of Kingfisher Airlines has not been reporting to work over the last fortnight and over the past two days. They have been threatening, and even manhandling, the employees who are reporting to work as usual,” Kingfisher said in a statement early today. “With a view to mitigating the impact of these anticipated disruptions, we are proactively cancelling several flights across our network for October 1, 2012.” The airline, however, did not give further details on the cancellations.

Reuters cited a newspaper report which claimed the airline's ground staff had refused to attach an air bridge to a plane in Mumbai on Sunday, stranding passengers on board, while some engineers "beat up" an executive. The report cited two unnamed sources. However, the Kingfisher spokesperson did not reply to phones calls and text messages, Reuters noted.

The Kingfisher management, which has not paid salaries to most of its staff since March, had a meeting with employee representatives last week, but failed to give any firm assurance.

The Vijay Mallya-owned airline is saddled with bank loans of more than Rs. 7,000 crore from 17 banks, which it has not serviced since January. State Bank of India has the maximum exposure to the airline at Rs. 1,400 crore.

The carrier has already grounded most of its fleet as of earlier this year. Under the government of India’s rules, an airline needs to operate at least five planes in order to maintain its licence.

The company is in talks with domestic and private investors, including private equity firms, for a fund infusion, Mr Mallya said at a meeting of lenders last week, adding that there has yet to be a concrete plan.

The lenders’ meeting ended inconclusively, with the next meet scheduled for end-October, when the lenders will decide on the sale of Kingfisher Villa, Kingfisher House and other assets.

Lenders have asked Mr Mallya to come up with concrete plans for restarting the airline’s operations.

Last month, the government allowed foreign airlines to buy stakes of up to 49 per cent in local carriers, a long-awaited policy move lobbied for by Kingfisher and seen as providing a lifeline to the country's debt-laden operators.

While no carrier has publicly expressed interest in buying a stake in Kingfisher, Mallya told shareholders last week he was in talks with foreign carriers for investments, echoing earlier comments about potential investments, which have yet to yield any announcement.

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