Kingfisher Airlines submits revival plan, DGCA seeks clarity

Kingfisher Airlines has gone through the motions of presenting a revival plan to aviation regulator DGCA today but the regulator appears far from satisfied.

Official sources said more details are needed on financial aspects of the plan and also there will be detailed consultations with all stakeholders such as airport operators etc. before a nod is given to the airline to resume operations.[caption id=“attachment_568090” align=“alignleft” width=“380”] Hope of flying. Reuters [/caption]

But as of today, there seems little clarity on whether Kingfisher’s talks with Abu Dhabi based Etihad Airways or any other strategic investor have been successful. So a limited operation is all the airline may achieve in the short run, provided it can satisfy additional queries the DGCA will shortly pose.

Here are five important things related to the airline’s revival:

1. Promoters will infuse Rs 652 crore into the airline but over the next 12 months. Of this Rs 120 crore has been earmarked for employee dues. The airline has said lender banks are unwilling to extend any more loans so all this money will come from the parent, UB group. Apart from salaries, a major portion of this Rs 652 crore will be used for refurbishing aircraft.

2. Kingfisher has denied having any dues with oil companies except some “interest dues” with HPCL. It has also clarified that payments of any dues will be outside the Rs 652 crore earmarked for operational revival.

3. The DGCA is not sure if Rs 652 crore infusion is enough to get the airline up and running. Source said prima facie, the plan does not look satisfactory. How will the plan become workable is what DGCA wants to know. Needs more clarity on financial matters. The Centre for Asia Pacific Aviation (Capa) has advised infusion of Rs 3,000 crore into the airline for it to be able to pay off vendors, ensure adequate spares and begin flights.

4. To begin with, the airline will put five Airbus 320 and two ATR aircraft to use. In a meeting with lending banks a few days ago, Kingfisher Airline officials had said they would be able to ramp up operations to 21 aircraft within a couple of months of getting DGCA permission to fly. Today’s plan speaks of getting 10 A 320 and 11 ATRs up and running within 10 weeks.

5. The DGCA says once it completes consultation with stakeholders and with the airline, Kingfisher will require six to eight weeks to begin operations. The revival plan also speaks of paying employees two months’ salary (salary and arrears) each month once operations actually start.

Chairman Vijay Mallya is believed to have held extensive discussions with Etihad for offloading minority equity stake in Kingfisher to the Abu Dhabi carrier, while also relinquishing management control. But sources tell us that Etihad has made it clear it will not shoulder Kingfisher’s debt and other liabilities.

Debt alone stands at over Rs 7,000 crore.

Airline employees say that though submission of the revival plan is good news, it may be end January before the airline actually begins to fly-if DGCA allows it to-and another four weeks before any kind of operational schedule is arrived at.

“Passengers need to be sure that they can trust the airline to maintain its schedule. This building of trust will need time. Also, the airline needs to ensure it takes employees along if it actually wants to get back to the skies,” says an employee.

Trust deficit is something Kingfisher will need to work hard on. It has been grounded since 1 October, when engineers refused to certify aircraft and all flights were suspended.