Kingfisher Revival Plan Inadequate
Monday, 28th January 2013 at 04:03am
Kingfisher Airline, once India's second-largest, is attempting to resurrect itself with the new investment of Rs. 6.5 billion rupees ($119 million) but an aviation regulatory official dismissed it as too small.
The troubled airline is estimated to have owed the banks, suppliers and other lenders a staggering $2.5 billion since it began operation in 2006. The amount also includes months of unpaid salaries to its employees. It lost its license to operate on December 31, 2012 after it failed to renew it. The government suspended its license on October 2012 and prevented it from flying following the massive cancellations of most flights and the growing labor unrest with most of its employees went on strike due to unpaid salaries. It has since been looking for investors but there seems to be no one is interested.
The airline's owner, Chairman Vijay Mallya, has proposed a revival plan with the Directorate General of Civil Aviation (DGCA) but it was considered inadequate by one DGCA insider.
The official said that the revival plan of Mr. Mallya misses a lot of key points that he needs to address. Some of the key points missing in his proposal is how he would deal with his lenders and his obligations to the employees whose months worth of salaries are still withheld. The plan should include all those provisions in order to guarantee a smooth operation.
Mr. Mallya has, reportedly, written a note to the airline staff telling them of his plans and that the plan would be funded by UB Group, the parent company of the airline. The revival plan will initially utilize 7 planes for the summer season.
When sought for comments, Kingfisher spokesman declined to answer any questions asked.
The airline's shares shot up to 10% on Thursday following the news of the revival plan but went almost unchanged the following day.
Since its trouble began, the bleeding airline has been looking for prospective investors but in vain. It was even rumored to have approached the Abu Dhabi-based Etihad Airways but there seemed to be no serious negotiation ever took place between the two.
By: Pete Lee.