Kingfisher Airlines Ltd. pilots and engineers said they will strike until seven months of unpaid salaries are settled, increasing the pressure on Chairman Vijay Mallya who has personally guaranteed $1.1 billion of the cash-strapped carrier’s debts.
“If there is no money, then there won’t be any take offs,” Vikrant Patkar, a Kingfisher captain, said after talks with Chief Executive Officer Sanjay Aggarwal in Mumbai yesterday. The CEO asked for 10 days to pay March salaries and didn’t give a timeframe for settling subsequent months, according to Patkar, who said he represented 250 pilots and 270 engineers.
The strike, which comes after Kingfisher locked out some workers and halted flights Oct. 1, further complicates Mallya’s almost 12 month search for a new investor for the carrier following years of losses. He’s also asked banks for more loans and begun talks on selling a stake in his biggest company by sales in a bid to raise more cash.
“If the strike continues, the airline’s collapse is imminent,” said Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. in Mumbai. “Once that happens, he may see his properties being seized and auctioned.”
Kingfisher defaulted on loan and interest payments on several occasions in the year ended March 31, the company’s auditor said in the airline’s annual report. The carrier had total debts of 86 billion rupees ($1.6 billion) as of March, according to data compiled by Bloomberg.
The airline today issued contradictory statements on when the services will resume. Sanjay Bahadur, a vice president, told reporters in New Delhi that flights will restart within a week after the carrier assured employees to pay March salaries in that time. Kingfisher later said in a text message that it “categorically denied comments attributed” to Bahadur.
Kingfisher’s founders have contributed 11.5 billion rupees since April 1, Mallya told shareholders on Sept. 26. The billionaire is in talks to sell a stake in United Spirits Ltd., the largest distiller in India, to Diageo Plc.
Mallya, ranked India’s 45th richest with a net worth of $1 billion by Forbes magazine in March, 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.
The carrier fell by about a 5 percent daily limit for the fourth Mumbai trading day in a row, hitting 13.90 rupees. The stock has declined 34 percent this year. Mallya’s United Spirits rose 0.3 percent while beermaker United Breweries Ltd. gained 0.6 percent at close of trading.
India’s aviation regulator submitted an interim report on Kingfisher to the aviation ministry yesterday, Press Trust of India reported, citing officials it didn’t identify. The Directorate General of Civil Aviation said in its report that non-payment of salaries was a matter of “serious concern” and the airline’s safety of operations have been “jeopardized,” according PTI.
The airline must settle wages before it can resume flights, a civil aviation ministry official said Oct. 2, after a meeting with Kingfisher management. The carrier intends to pay outstanding wages using 600 million rupees in frozen bank accounts, the management said at a meeting, according to Arun Mishra, the Director General of Civil Aviation.
The carrier has 10 planes, comprising seven A320s and three Avions de Transport Regional turboprop aircraft, Mishra said Oct. 2. It has enough staff for 60 planes, he said.
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 carrier 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 (India) Ltd. and 76 percent at SpiceJet Ltd.