Kingfisher Air Extends Flight Shutdown Amid Strike

Kingfisher Airlines Ltd. (KAIR) extended a shutdown through Oct. 12 after striking pilots and engineers at the cash-strapped Indian carrier refused to resume services until seven months of unpaid salaries are settled.

“We regret that the illegal strike has still not been withdrawn and normalcy has not been restored in the company, thereby continuing to cripple and paralyze the working of the entire airline,” Kingfisher Air said in a statement yesterday.

The airline regulator is considering revoking Kingfisher’s license because of safety concerns and the strike, Aviation Minister Ajit Singh said in an interview today. The shutdown adds pressure on Chairman Vijay Mallya as he seeks investments needed to avert the collapse of his airline struggling with 86 billion rupees ($1.6 billion) of debt and years of losses.

On Oct. 1, Kingfisher announced flight suspensions through Oct. 4 after some employees refrained from attending work. A group of pilots and engineers said in Mumbai on Oct. 3 after a meeting with the management that they would resume services only after seven months of salary due is paid.

Kingfisher Chief Executive Officer Sanjay Aggarwal asked for 10 days to pay March salaries and didn’t give a timeframe for settling subsequent months, according to Vikrant Patkar, a Kingfisher captain who said he represented 250 pilots and 270 engineers.

Legal Advice

The Directorate General of Civil Aviation is seeking legal advice on issuing a notice to Kingfisher about canceling its license, Minister Singh said today. The regulator isn’t satisfied with the carrier’s safety standards following the delayed salaries and strike, he said.

Kingfisher defaulted on loan and interest payments on several occasions in the year ended March 31, the company’s auditor said in the annual report. The carrier had also delayed payments to banks, airports, tax authorities and fuel suppliers.

Mallya has said he is in discussions with overseas airlines to sell a stake in Kingfisher, after India’s government last month eased investment rules. The billionaire is also in talks to sell a stake in United Spirits Ltd. (UNSP), the largest distiller in India, to Diageo Plc. (DGE)

Kingfisher’s founders have contributed 11.5 billion rupees since April 1, Mallya told shareholders on Sept. 26. He also gave personal guarantees totaling 59 billion rupees for loans taken by Kingfisher, according to the annual report. It didn’t give the terms for the guarantees. Assets worth 89 billion rupees, including brand, planes and office furniture, have also been pledged to back the airline’s loans.

Share Performance

The carrier fell by the daily limit of about 5 percent for the fifth straight day to 13.25 rupees. The stock has dropped 37 percent this year. Jet Airways (India) Ltd., the nation’s largest listed carrier, and budget operator SpiceJet (SJET) Ltd. have both more than doubled this year.

Kingfisher has 10 planes, comprising seven A320s and three Avions de Transport Regional turboprop aircraft, Arun Mishra, India’s Director General of Civil Aviation, said Oct. 2. It has enough staff for 60 planes, he said. The number of employees at the carrier fell to 5,696 in the year ended March 31 from 7,317 in the previous 12-month period, according to the company’s annual report.

Bharath Raghavan, company secretary of Kingfisher, resigned effective Sept. 30, the carrier said in a statement to the Bombay Stock Exchange yesterday.

Kingfisher, named after Mallya’s flagship beer brand, has slumped to sixth from second in terms of domestic market share after paring services and losing passengers. It had a 3.2 percent share in August, the lowest among six carriers.

The airline has a long-term debt-to-total capital ratio of 162 percent, according to data compiled by Bloomberg. That compares with 58 percent at Jet Airways and 76 percent at SpiceJet.

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editors responsible for this story: James Langford at jlangford2@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

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