Kingfisher on the brink: DGCA to decide future this week

New Delhi: By this weekend, the Directorate General of Civil Aviation (DGCA) could take some tough action against Vijay Mallya. Director General EK Bharatbhushan told Firstpost today that though Mallya’s Kingfisher Airlines is sticking to its truncated schedule, which it had filed with the aviation regulator this February, it has still not reverted with a recovery plan for the airline.

“This is completely unacceptable. We are very concerned and in a day or two we will come to a decision on Kingfisher”. Though he refused to specify what the decision would be, the Aircraft Rules allow for Kingfisher’s Scheduled Operator Permit (SOP) to be cancelled if the airline continues to suffer extreme financial stress, is unable to maintain the integrity of flight schedules and causes extensive passenger inconvenience.

[caption id=“attachment_373460” align=“alignleft” width=“380”]  Kingfisher has a total debt of about Rs 7,057 crore and accumulated losses of about Rs 6,000 crore. AP[/caption]

Bharatbhushan said apart from sticking to their truncated flying schedule, which specifies that 20 aircraft will be available for operations daily (against more than 60 earlier), the regulator is also continuing with its special safety oversight on a daily basis to ensure safety of passengers on Kingfisher flights. This practice was begun by the DGCA from March, when the airline’s severe financial stress came into focus.

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Already, some captains flying the ATR fleet of Kingfisher, and largely based in Delhi, have stopped reporting for duty from today due to non-payment of salaries since February this year. An agency report said five flights have been cancelled: two flights each to Dharamsala and Dehradun and one to Shimla from Delhi have been cancelled.

A senior captain based in Mumbai told Firstpost that if salaries are not paid by Friday, more pilots are sure to join in. He said despite a large scale exodus from Kingfisher in the last several months, about 110 captains are still on the airline’s rolls and about 240 co-pilots also work for the airline. He claimed that of the eight ATR aircraft in its fleet, Kingfisher has at least three grounded for maintenance purposes.

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This captain also asserted that the airline is not maintaining its 20 aircraft fleet, as promised to the DGCA in the summer schedule for 2012.

Kingfisher has a total debt of about Rs 7,057 crore and accumulated losses of about Rs 6,000 crore. Earlier this morning, State Bank of India (which leads the consortium of banks which have outstanding loans against the airline) Chairman Pratip Chaudhuri admitted that a full recovery of $1.4 billion in loans was unlikely in the short term and banks have told the airline to infuse equity.

Last week, the airline won more time from lenders to develop a turnaround plan. It has never made a profit since inception and now lenders are considering a sale of Mallya’s non-core assets to partly recover their dues. ICICI Bank, the second largest lender to Kingfisher, has already unloaded its debt to a fund managed by SREI Infrastructure Finance .