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Kingfisher Air Plans to Resume Flights as Workers End Strike

Kingfisher Airlines Ltd. (KAIR), the cash- strapped carrier that had its license suspended following a strike, said it plans to resume flights in the next few weeks after employees agreed to return to work.

“We are all together,” Kingfisher Air Chief Executive Officer Sanjay Aggarwal told reporters in New Delhi yesterday after reaching an agreement with employees on salary payments. “We are going to be back in the skies very soon. Everyone from pilots to engineers are resuming duty as we speak.”

The breakthrough in negotiations with employees, who had previously rejected the management’s offers, may help Kingfisher convince India’s aviation regulator to lift the license suspension imposed last week. The carrier will still need to raise funds to ensure that future operations aren’t disrupted, according to Harsh Vardhan, chairman of Starair Consulting.

“This is only one of the issues they were staring at,” said Vardhan, whose New Delhi-based company advises airlines. “The main issue is still the Kingfisher management’s ability to arrange funds to operate the airline.”

Kingfisher, controlled by liquor tycoon Vijay Mallya, shut down services this month after pilots and engineers walked out, demanding seven months of unpaid salaries. The carrier will pay three months of arrears before Nov. 13 and the remainder by March next year, S. C. Mishra, an engineer who represented New Delhi-based employees, said after the meeting.

Kingfisher rose 4.6 percent to 11.35 rupees at close of trading in Mumbai, advancing for a second day. The stock has slumped 52 percent in the past year.

Revival Plan

The strike and flight disruptions prompted the Directorate General of Civil Aviation to suspend the airline’s operating license on Oct. 20 until it submits a “concrete and reliable” revival plan. Kingfisher failed to address the issues raised by the regulator, according to the DGCA.

Mallya’s UB Group will invest in Kingfisher to help revive operations, an Indian government official said today, after the airline CEO met the DGCA. The carrier must prove it has adequate funds to pay airports, fuel suppliers and other vendors before the license suspension can be lifted, the official, who declined to be identified citing rules, said.

Kingfisher will soon submit a revival plan to the regulator, CEO Aggarwal told reporters in New Delhi. He didn’t give a timeframe. The regulator may take about two weeks to decide on restoring the license after the carrier presents its plan, the government official said.

Indian Grand Prix

Kingfisher employees won’t stage protests at the venue of the Indian Grand Prix in which Sahara Force India Formula One team, part-owned by Mallya, is participating, according to Mishra. The motor race is scheduled for this weekend.

Mallya thanked the workers through his Twitter Inc. social- networking site for agreeing to end the strike. “All Kingfisher Team members back at work and fully supportive,” he wrote.

The Kingfisher Chairman has been seeking funds for about a year for the carrier that is struggling with 86 billion rupees ($1.6 billion) of debt and five straight years of losses. He is also in talks to sell a stake in United Spirits Ltd. (UNSP) to Diageo Plc. (DGE) Since April 1, Kingfisher’s founders had infused 11.5 billion rupees in the company, Mallya said last month.

Mallya may find it “very difficult” to revive Kingfisher, India’s aviation minister Ajit Singh said Oct. 23. The airline has failed to pay taxes and also defaulted on lease and airport fee payments, Singh said.

Kingfisher defaulted on loans and interest payments on several occasions in the year ended March 31, the carrier’s auditor said in the company’s annual report. Mallya gave personal guarantees totaling 59 billion rupees for the carrier’s loans.

Mallya’s networth shrank to $800 million this month from $1 billion in March, according to Forbes magazine. His ranking fell to 73 among India’s richest from 45.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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