Kingfisher crisis: Partial lockout extended till October 12 after talks fail

A statement issued by the Kingfisher Airlines today said, "We regret that the illegal strike has still not been withdrawn and normalcy has not been restored in the Company, thereby continuing to cripple and paralyse the working of the entire Airline. In light of this, Kingfisher Airlines Ltd. has been constrained to extend the partial lock-out which commenced from Monday evening (1st of October, 2012) up to Friday the 12th of October, 2012 or up to such earlier date on which the said illegal strike is called off, and the management is informed about the same."

After talks with protestors failed yesterday, CEO Sanjay Aggarwal is dashing across the country today and tomorrow to meet employees in Delhi, Bangalore and Chennai in an effort to defuse the crisis. Pilots, who joined the engineers in their protest on Monday morning, say they want salaries for seven months and no less. The engineers say they have lost confidence in the company. Both sets of employees have set up different associations. Kingfisher last paid salary to about 2000 of its 4000 employees in March this year. No Kingfisher flight has taken off since Monday.

In Delhi, Susmita Chakravarti, the wife of a Kingfisher employee committed suicide in the afternoon today. Her suicide note said that her husband, Manas Chakravarti, a store manager in the airline, has not been paid salary for six months and she is killing herself due to the financial stress. Candlelight vigils were held in Mumbai and Bangalore by Kingfisher employees this evening. (Read)

But in order to fly again, the airline must convince not just unhappy employees, but also the aviation regulator, the Directorate General of Civil Aviation (DGCA), which has made clear that its permission is necessary for Kingfisher planes to take off again. The DGCA wants a viable operations and recovery plan from the airline. And it also wants salaries paid before it gives its nod.

The DGCA has maintained that no aircraft will be allowed to take off unless the airline's engineers certify the plane fit to fly. And because it is the engineers who make sure the plane is fit to fly, the fleet has been grounded. The DGCA reportedly holds that the whole winter schedule of Kingfisher, including routes and landing spots, needs to be looked at by the end of October and landing spots have to be considered afresh.

The government is taking a tougher stance now after allowing the airline to operate for months without paying salaries, although it has stopped short of forcing a closure of the heavily indebted carrier. Civil Aviation Minister Ajit Singh today said the government needs concrete plans, not status reports, from the airline on how it will operate, maintain schedule and if its aircraft are safe to fly. The ball is in Kingfisher's court, he added.

In an interim report on Kingfisher submitted to the government yesterday, the aviation regulator has reportedly focused on security and the salary issues. Sources say that it has observed that safety of operations has been seriously jeopardised. The regulator is also believed to have said that non-payment of salaries is a matter of serious concern, and not only for the employees as it has also affected safety - engineers and pilots are crucial to safe airline operations.

Kingfisher's lenders, who met in Mumbai today, will be the bigger casualty if the airline were to go bust. An official at a public sector bank said the lenders will not be able to recover even 10 per cent of their outstanding loans to the airline by monetizing their collaterals. The Vijay Mallya-owned airline and its promoters have most of their shares and assets pledged with banks, including the brand Kingfisher (pledged for a value of Rs. 4,100 crore) and two of its properties - the Kingfisher Villa in Goa and the Kingfisher House in Mumbai - together valued at around Rs. 200 crore.

Shares in Kingfisher Airlines dropped for a fourth consecutive day on Thursday, after slumping nearly 5 per cent in each of the previous three sessions. Last week, the Bombay Stock Exchange had halved its circuit limits on the stock, capping the maximum movement in a day at 5 per cent following a sharp rally in the share prices in the past few days.

Before the shutdown, Kingfisher was operating just 10 planes out of a fleet that once numbered 64, according to the DGCA. According to Indian rules, an airline has to fly at least 5 planes to retain its status as a scheduled carrier. The airline is saddled with a huge loss of around Rs. 8,000 crore.