No end to Kingfisher crisis as deadlock continues: Latest Developments

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. (Read: With no confidence on management, most Delhi staff shun meeting with CEO)

Kingfisher vice president of corporate affairs Sanjay Bahadur has said the airline expects to pay salaries for March within a week, Reuters reported. Mr Bahadur said the airline expects to resume operations in four or five days. He has been quoted as saying that he expects about 100 pilots and engineers in Delhi to return to work by then. (Read: Kingfisher Airlines expects to start operations in 4-5 days, says vice-president)

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 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. (Read: Ball is in Kingfisher's court, says Ajit Singh)

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. (Read: Aviation regulator submits report on Kingfisher Airlines)

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.

Kingfisher's lenders, who are meeting in Mumbai now, 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. (Read: Kingfisher lenders hope airline management won't let go belly up)

Shares in Kingfisher Airlines dropped for a fourth consecutive day 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. (Read More)

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.