Kingfisher's long, winding path to flight resumption

Kingfisher Airlines will now not only have to pay four months' salary dues - about Rs 80 crore - to its employees by December, it will also have to clear dues it owes to airport operators, oil companies and other stakeholders before it can fly.

In other words, unless all those whose business has been affected by Kingfisher's near demise agree to waive off some loans and stand by the airline, it may find it tough to fly again despite employees returning to work.

 Kingfishers long, winding path to flight resumption

nce the airline decides to come back to the DGCA with a revival plan, it will then also have to sit through joint meetings between stakeholders and the regulator if it hopes to fly again. AFP

In a meeting with the airline CEO Sanjay Agarwal, aviation regulator DGCA made it clear today that apart from fulfilling all the above conditions, Kingfisher must also immediately get in touch with DGCA's regional offices to get its aircraft checked for airworthiness and operational preparedness certified.

Once the airline decides to come back to the DGCA with a revival plan, it will then also have to sit through joint meetings between stakeholders (basically all its creditors) and the regulator if it hopes to fly again.

Clearly, it is a long and winding road ahead for Kingfisher if it really wants to fly again.

CEO Sanjay Agarwal conveyed to the regulator this afternoon that money needed to run operations, including salaries and other daily expenses, will come from the promoters or the UB Group. But he did not give a timeline by which a revival plan would be submitted.

A senior Kingfisher pilot told Firstpost the airline has already paid insurance premium on 44 of its aircraft and its initial plan is to begin operations with 7 Airbus and 5 ATRs.

"But this may not work since Airbus operation itself needs over 40 captains when we are now left with only 34....the airline will need substantial capital to restart operations. It needs to pay for oil, dues to airport operators, get aircraft in working condition so that means its cash position should be strong".

So how much money does Kingfisher need immediately? A report in Mint newspaper this morning quotes an analysis by the Centre for Asia Pacific Aviation (CAPA) to say that the airline needs more than $1 billion to fully fund a turnaround business plan.

It also said that the immediate requirements to actively re-launch the airline-as opposed to operating a skeletal fleet of five aircraft-has increased from an earlier $600 million to closer to $700 million.

But will the UB Group, which is itself not in the pink of health financially, be able to support an ailing airline whose line of creditors is just getting longer?

Earlier this week, Business Standard reported that Hindustan Petroleum Corporation Limited (HPCL) has encashed a bank guarantee worth Rs 434 crore provided by Kingfisher. The story said that until September 2012, the airline owed Rs 341 crore to HPCL in fuel dues.

HPCL is Kingfisher's largest supplier of aviation fuel. In March, HPCL had snapped fuel supplies to Kingfisher, owing to non-payment of dues. While Indian Oil's supplies to Kingfisher Airlines are negligible, Bharat Petroleum Corporation Ltd (BPCL) sells fuel to the airline on a cash-and-carry basis at select airports.

Then, the airline owes close to Rs 300 crore to the Airports Authority of India besides other large sums it owes to private airport operators such as GVK, GMR and operators of Bangalore International Airport. The licence of Kingfisher was issued on August 26, 2003, and is valid till December 31 this year.

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Updated Date: Dec 20, 2014 13:09:04 IST