Kingfisher Airlines Thursday reached a settlement with employees by offering to clear three-months of overdue salary by mid-November. The airline, controlled by Vijay Mallya, hadn’t paid most of them since March.
This ends a 25-day strike by the airlines pilots, engineers and technicians that forced the airline to cancel flights indefinitely. But the ailing carrier’s troubles are far from over.
On Oct. 20, India’s aviation regulator suspended the Kingfisher’s license as the airline failed to produce a plan on how it will revive its operations.
On Monday, Chief Executive Sanjay Aggarwal said it will take Kingfisher at least two weeks to submit a fresh operations plan.
This means it will already have lost potential revenue for more than a month if it resumes operations as quickly as is feasible. The bigger problem for Kingfisher, however, is that taking to the air may not be the answer to its financial problems. Because of the high cost of jet fuel and low seat occupancy on Kingfisher flights, the company may lose less when its planes are on the ground.
“Kingfisher loses 80 million rupees ($1.49 million) every day that it flies, and 40 million rupees every day that it doesn’t fly,” India’s aviation regulator Arun Mishra told India Real Time, citing figures given to him by Mr. Aggarwal, Kingfisher’s CEO. Neither Kingfisher’s spokesman Prakash Mirpuri nor Mr. Aggarwal could be immediately reached for comment.
It’s worth noting that the airline also has assured payment of only a part of the overdue compensation owed to employees and said the rest will be cleared once it raises cash.
Where that cash will come from is unclear. Mr Mallya has said he is in talks with foreign investors, including overseas carriers, to sell shares in Kingfisher. Analysts said he would find it difficult to attract outside investment after the recent crisis.
“Revival of Kingfisher Airlines was earlier, and now as well, totally dependent on its promoters raising a minimum of $600 million, which is highly unlikely,” said Kapil Kaul, south Asia head for Sydney-based CAPA-Centre for Aviation. He said the airline’s turnaround would cost $1 billion.
Kingfisher, named after India’s most popular beer brand, has been unprofitable since its inception in 2005. The airline has piled up losses of about $1.9 billion between May 2005 and June 30, according to CAPA.
Kingfisher also still has its huge debt load to carry. The airline owes about $2.5 billion to lenders, leasing companies, suppliers and majority shareholders. Lenders have refused to give it any more money, and are now trying hard to recover their debt.
On Thursday evening, Mr. Mallya said on social networking site Twitter: “All Kingfisher Team members back at work and fully supportive. I sincerely thank all of them for their faith and continuing commitment.” He may require even more of them yet.