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Kingfisher Airlines loses operating license

by ASC Staff on Jan 2, 2013




By Neil King

Indebted Indian carrier Kingfisher Airlines has lost its operating license after failing to present regulators with a clear funding plan.

The airline was suspended in October due to unpaid debts and salaries, but hoped that a funding plan submitted to the Directorate General of Civil Aviation (DGCA) in December would see its revival.

However, the plan was not backed by details of financing, leading to the expiry of the license at midnight December 31.

Kingfisher is permitted to renew the license within two years, according to DGCA regulations, and the airline claims it is “confident of securing approval from the DGCA on the restart plan, license approval and reinstatement of its operating permit”. Doubts still remain as to whether vital funds will be forthcoming in order to facilitate this.

The carrier, owned by liquor tycoon Vijay Mallya, has estimated debts of US$2.5bn, owing money to banks, staff, airports and tax authorities. Kingfisher has been grounded since October and recently saw two-thirds of its 63 aircraft repossessed by creditors.

In a statement, Kingfisher said its funding plan outlines that required finances would be provided by its parent company, UB Group. But India's Civil Aviation Minister Ajit Singh told reporters last week that UB “did not say they are going to give anything” to Kingfisher.

The airline was also recently in talks with Abu Dhabi-based Etihad Airways for investment, alongside Indian rival Jet Airways.

Etihad is seeking to widen operations in India, but analysts are sceptical over the likelihood of any potential tie-up with Kingfisher, given the latter's dire financial state.

Sharan Lillaney, equities analyst at Angel Broking, previously said “It is very unlikely for any airline to buy a stake in Kingfisher in its current state,” while Saj Ahmad, chief analyst at StrategicAero Research said “I find it hard to believe a grounded Kingfisher would somehow be ‘better’ [than Jet Airways] for Etihad”.

Shares of Kingfisher fell 3 percent to INR14.45 at close of trading in Mumbai yesterday. The BSE India Sesitive Index gained 0.8 percent.
 


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