Kingfisher’s woes worsen as talks with its staff fail

Agencies/New Delhi

An employee sits in front of a closed Kingfisher Airlines ticketing counter at the Kolkata airport yesterday

The crisis at Kingfisher Airlines deepened yesterday, its third straight day of grounded flights, after the firm failed to persuade striking employees back to work, a staff source said. With fears mounting for its future, the airline held emergency talks with workers but said they would be unable to pay the full seven months salary owed to some employees, a pilot at the meeting said, declining to be named. “They have also not committed on when they can pay us. Until we get our salaries, we will continue with the strike,” he said. The airline’s shares closed 4.89% down to Rs14.6, after the civil aviation regulator said the company cannot fly again until it submits a revival plan and meets all safety norms. Kingfisher shares have fallen 9.42% this week. With talks failing, it is unclear if Kingfisher will be able to resume operations tomorrow, as initially indicated when the company declared a partial lock-out on Monday night, blaming unrest by striking workers. The Bangalore-headquartered airline said a minority group of “recalcitrant employees” had forced a “complete paralysis” of operations, leading to the cancellation on Monday of all flight operations initially for three days. Kingfisher’s engineers went on strike last Friday to protest against not being paid since March, with some pilots and other employees joining the walkout on Monday, according to media reports. The government is taking a tougher stance 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. Kingfisher has debt of $1.4bn, owed mostly to government-controlled banks including State Bank of India, the country’s top lender. “There is a stalemate,” Vikrant Patkar, a Mumbai-based pilot in command, told reporters yesterday after a meeting with Kingfisher’s chief executive and chief operating officers. “The company has refused to pay us seven months of salary. So we will not let any flight to operate at least from Delhi, Mumbai and Bangalore,” he said. The airline, controlled by liquor baron Vijay Mallya, won’t get the government’s approval to resume flying before it pays staff salaries and submits an acceptable recovery plan, a senior official at the Directorate General of Civil Aviation told reporters on Tuesday, declining to be identified as the negotiations are private. “This is going to last for a long time,” said Sharan Lillaney, an aviation analyst at Angel Broking in Mumbai. The airline loses Rs40mn ($760,100) a day if it flies and twice that if it doesn’t, a senior government source said. The airline declined to comment on its daily losses. While shutting down saves the embattled airline money, the grounding of its fleet deals a further blow to its ability to win back passengers should it resume operations.   “Even if they start, nobody is going to buy their tickets now. People cannot afford inconvenience at such a time when there are other options available with similar service and at the same price,” Lillaney said. Kingfisher is now the smallest among India’s six main carriers, and its steep decline has enabled rivals such as Jet Airways and IndiGo to raise fares in what had been a ferociously competitive market plagued by overcapacity. Kingfisher, which as recently as last year was India’s No2 airline by market share, has never earned a profit since it was founded in 2005. It has also defaulted on payments to banks, airports and oil companies. The airline plans to use Rs600mn in bank accounts frozen by authorities to pay staff, the DGCA said on Tuesday, but it was unclear how it was going to get at those funds. Tax officials froze Kingfisher accounts earlier this year after it failed to deposit taxes deducted from staff. Kingfisher is half a year or more behind on salaries. Its employee expenses for the year that ended in March totalled Rs6.7bn, although many staff have left since then. The company has been scrambling to find investors. While it has said it is in talks with global airlines for a potential investment, no airline has publicly expressed an interest. India recently let foreign airlines own up to 49% of Indian carriers in a move long lobbied for by Kingfisher. However, Kingfisher’s attractiveness is undermined not just by its debt but by a tough Indian operating environment that saw all but one major carrier lose money last year. So far, its banks have refused to lend it more money without an additional funding infusion. “As far as we are concerned this is something which is not entirely shocking or unanticipated,” S Vishvanathan, deputy managing director at State Bank of India, the airline’s lead lender, said yesterday. “We have known that Kingfisher is having increasing problems. So the final solution hinges on how the capital will be infused, how the cash flow will improve,” he said.

Airfare hike unlikely, say expertsThe lockout at Kingfisher Airlines will not lead to a hike in airfares, airlines and aviation experts said. “The reduction in seats by KFA had anyway been factored in by competing airlines during the last two quarters. So we do not expect across-the-board increase in fares,” Amber Dubey, partner and head of aviation at consulting firm KPMG said. “The fare hikes may be restricted to the few routes that KFA was operating with its depleted fleet.” Other airlines like Air India said fares would remain stable as the carriers had taken out discount schemes at the onset of the festive season. “Kingfisher was already operating on a very minimum capacity. The last-minute fares may be affected, but not short- to medium-term bookings,” said a senior Air India official. The airlines will also be deterred by the aviation regulator keenly following fare trends through its airfares intelligence unit. The Directorate General of Civil Aviation (DGCA) had warned airlines against engaging in predatory pricing following strikes.