India’s Kingfisher Airlines has suspended operations at least through October 12 after failing to reach agreement with striking staff over seven months of unpaid wages.
October 8, 2012, 10:50 AM
After failing to reach an agreement with striking engineers and pilots who have not been paid since March this year, India’s Kingfisher Airlines has effectively grounded itself until at least October 12 by locking out staff. Kingfisher’s management, led by owner Vijay Mallya, is trying to renegotiate some $2.49 billion in debt with creditors while it struggles with serious cash-flow problems, evidenced by $1.9 billion in losses for the first half of this year.
Kingfisher stopped flying on October 1 after its own engineers refused to certify the safety of its operation. CEO Sanjay Aggarwal spent much of last week trying in vain to persuade staff to return to work. He offered to pay wages due for March, but the strikers are seeking faster repayment of unpaid salaries for the full seven months they say they are owed. The situation was further inflamed on October 4, when the wife of an engineer killed herself, leaving a suicide note highlighting the stress caused by Kingfisher’s failure to pay her husband. Kingfisher has not commented on the death, but issued a statement saying it would extend a lockout through October 12 “as the illegal strike has not been withdrawn.”
According to the Center for Asia Pacific Aviation (CAPA), Kingfisher will need at least $1 billion in fresh capital to resume operations with its dwindling fleet, and this figure will increase the longer it takes to secure fresh investment. The Australia-based consultancy has urged the company to shut down voluntarily to restructure itself. In the last few months, Kingfisher’s domestic market share fell to 3 percent from 24 percent. “The situation at Kingfisher is critical. The regulator cannot ignore the real safety risks [attributable] to extreme depression among technical staff,” CAPA’s South Asia CEO, Kapil Kaul, told AIN. “The Kingfisher case has also highlighted the need for more effective bankruptcy laws in India. There should be formalized procedures for a [company to restructure itself and] emerge from bankruptcy,” he added.
According to Indian aviation analyst Jitender Bhargava, there is no chance of Kingfisher’s being saved by the Indian government’s decision to permit foreign investment in Indian carriers. “There will be no takers for Kingfisher [because it] is saddled with such high debt,” he said.